Michael Grehan, Managing Director, Sherry FitzGerald.
Investment in any market is not for the faint hearted. This is perhaps especially true today. Collapsing equity markets, turmoil in the financial markets, global credit crunch are all words that bring fear to any would-be investor of any asset class, be it shares or property. Yet the world will not stagnate as a result of these events, deals will be done, money will be made and lost, of that there is no doubt. Yet the global events will inevitably impact investment decisions here as abroad and brings perhaps even more concerns for Irish property buyers.
I am asked on a daily basis for advice from potential purchasers and vendors. Is now a good time to buy? Should I sell now or wait until autumn etc?
In the market that pertained for much of the 1990s and into the early years of this decade such questions were easier to address. Now the combination of local and international events mean that perhaps each question requires closer scrutiny with careful consideration of the personal circumstance of the person asking the question. However there is still an over-riding theme to the response. Property is a long term investment and history shows us that quality locations will sustain values better through periods of turbulence than developing locations.
There is no doubt we all got a bit carried away when the market was at its hottest. The current climate confirms that investing in any asset class is not always a one way bet and timing is important. However, surely when we look back at what our parents paid for the houses we grew up in and the comparable values that their houses are now worth, it is clear how capital appreciation has positively affected property over time. Talk to any of our parent’s generation and they can confirm that it was not always plain sailing, whether they bought in the emigration ridden 1950s, or the more optimistic 1960’s, the oil crises of the 1970s or the recessions of the 1980s, there were scary moments in the early years of any mortgage. However history you could say is predictable, in that it does repeat itself, as such I believe it is only a matter of time for the current crisis to pass. Equities will bounce back, property prices will rise and our sons and daughters will lament on how easy we had it when buying houses in the noughties.
That’s all well and good, many will say but just how is the market performing today. In short despite the doom and gloom which seems to surround all markets it must be said that the market, certainly the Dublin second hand market is surprisingly busy. If I had to call it I would say that the market seems to have bottomed out and activity levels are good.
There is also a lot more clarity about the market in the opening months of 2008, compared to the same period in 2007. At that point the question of “will he or won’t he amend stamp duty” was on everyone’s lips. Interest rates were rising with no clear sight as to where it would end. Negative sentiment pertained over much of the market.
Now the fog has cleared and there is a high degree of realism in the market place, particularly among sellers, in short the market is moving. If buying today, you can comfort yourself by the fact that the cost of the property is up to perhaps 20% less than you might have paid two years ago. Stamp duty will cost you less and mortgage interest relief has been increased significantly for first time buyers.
Such incentives significantly aid buyers, however, they are not the only ones affected in a positive way. Sellers also benefit from increased activity in the market. They may not achieve as much as they initially expected for their property however for the majority of sellers this is only a small dent on the significant gains they will have made on the property.
There is no doubt that it is still a buyers market. For the first time in over a decade, buyers have the chance to acquire a property of their choosing rather than a compromise to ensure their footing on the property ladder. However there are some gradual changes to the market place. Since Christmas the proportion of properties achieving in excess of amended asking prices has risen significantly. Furthermore, the stock coming onto the market remains tight. Both of these elements suggest to me that the market is gradually turning. The combination of this and a potential interest rate cut, however modest, bodes well for the year ahead. That is not to say that I anticipate a return to rising prices rather a new maturity where buyers and sellers can agree on a fair value for property which allows a healthy level of transactions.
After 18 months of uncertainty, a new certainty is perhaps emerging. We are, if nothing else, one year closer to the next property boom! I would conclude by saying some of the best decisions are made in face of adversity. I bought my first house in the middle of the currency crisis of 1993, and though I will admit to some sleepless nights in the early days, what a fantastic decision it turned out to be. Some of the wisest purchasers of the past decade signed contracts for properties in September 2001, they may not have received many accolades from friends and colleagues at the time but by February 2002, they were the ones smiling at all the dinner parties.
Date Posted: 2008-06-12T12:00:21.263