How to..... Survive the property slump
October 25, 2008
By John Cagney
“Look for a house near the city centre that has already dropped in value” – that’s the advice of Paul Lappin of Property Team, Phibsboro, Dublin, to prospective buyers looking for a safe investment as house prices continue to fall.
New housing estates are empty, second-hand houses are not selling at their asking price and many home-owners are running into serious problems with their mortgages, as the economy swings into recession.
Yet every day people have to brave the property market, no matter what the situation.
“I would be wary of investing in apartments at the moment”, Lappin warns, especially one-bedroom flats which are plummeting in value. Some one-bedroom units on the Dublin quays have already dropped from €300,000 to €180,000, but other sellers are still holding out with “unrealistic” prices.
If you’re buying a second home, be aware of the current economic climate. Don’t expect to see the massive value inflations of the last few years, they are not the norm. Lappin advises investment buyers to ensure that their rental income will cover their mortgage repayments.
Two and three bed houses close to the city will always be a safe bet, but commuter estates and apartment blocks, which were built at a rapid rate to accommodate an increasing and affluent population, are not selling well now.
70% of asking prices are unrealistic at the moment, he estimates, with houses owners stubbornly refusing to bow to the changing market. However there are still opportunities to buy – especially a well-located house that is 30-40% below peak prices.
“If you see a bargain grab it”, he suggests. Property Team are currently showing a 2-bed townhouse in Drumcondra which has dropped from a €550,000 asking price to a very reasonable €360,000. A modern home in a quiet city location, it is very unlikely to loose any more value.
The CSO latest figures show an average new house in Dublin in the 2nd quarter of 2008 cost €390,544, down from €426,900 the year before. Although this figure has probably declined even further since the credit crunch kicked in, there is reason to believe the market will become stable.
“The banks will probably start lending again early next year, although some prices will have to drop further before then”, Lappin predicts.
Looking back a few years, average new houses in Dublin jumped a whopping €55,000 from 2005 to 2006, so a slight settling back down is only to be expected.
Presentation is the key to making a good sale. If someone takes a real shine to your property they will be willing to pay a fair price. If you can’t afford major improvements, try some DIY and deep cleaning before showing the property.
But it is important to begin with a reasonable asking price; otherwise it will be difficult to attract viewers. It’s off-putting to see a property that has been on the market for a long time, which will happen if your price is too high.
Although Lappin expects the market to pick up next year, there is no reason to hold off selling now if you plan to buy immediately afterwards. There are bargains to be found as people try to get properties off their hands that have refused to sell at a higher price, and these will be snapped up as the market begins to recover.
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