Market Fundamentals Remain Sound
Wednesday, January 2nd 2008
Sherry FitzGerald announced today (Wednesday) that the average price of a second-hand property in Ireland fell by 2.4% during the final quarter of 2007, with the results for the year to date down 6.8%. However, if one excludes the Dublin market from the analysis, the figures show a more moderate price reduction with prices falling by 2.1% during the fourth quarter and 3.1% in the year.
If one examines trends in the Dublin market alone it shows a price reduction of 2.7% in the quarter, bringing the results for the year to minus 9.9%. The Cork market shows price reductions of 2.3% in the quarter and 4.5% in the year overall.
Commenting on the results Marian Finnegan, Chief Economist, Sherry FitzGerald Group said; "The Irish and in particular the Dublin property market was negatively impacted by the erosion of consumer confidence in the performance of the market. This began somewhat notoriously with the furore about stamp duty in autumn 2006 and was augmented by the rising interest rate environment and the tightening of the financial sectors policy in relation to bridging finance. This trend was alleviated somewhat by long awaited abolition of stamp duty for first time buyers in June, however the market anticipated further changes and as a result activity levels did not rebound significantly. The net result is a year of price deflation after ten to twelve years of phenomenal price inflation.”
Further Ms Finnegan added; “The amendments in the treatment of stamp duty as announced on December 5th will at long last bring finality to the discussion on stamp duty, allowing normal market activity levels to be reignited. This is undoubtedly good news for the property market. The penalising rate of stamp duty applicable in the second-hand market has for too long acted as a barrier to entry into the established property market and was in effect a tax on mobility. Furthermore, despite the lack of consumer confidence in 2007, the fundamentals underpinning the market remain sound, a factor which will underwrite its performance in the medium term.”
Despite the uncertainty in the second-hand market, first time buyer demand remained surprisingly resilient with 36% of all sales bought by the cohort. Investors also remain quite active purchasing 16% of all second hand properties traded by Sherry FitzGerald in the year. Despite the lack of price inflation in 2007, the continued resilience of demand for property is reflected in the very positive rental inflation in the market – the CPI index of private owned rents rose by 11.1% in the year to November 2007.
An analysis of the profile of vendors who sold their property through Sherry FitzGerald in the year revealed that 29% of vendors were selling investment properties. Furthermore, approximately 24% of vendors sold with the intention of purchasing a larger property. This is a very healthy indicator of the buoyancy of the economy. Finally approximately 25% of vendors were selling their home to relocate to a different county within Ireland.
Looking to the future Ms Finnegan noted; “2007 was undoubtedly a challenging year for the property market but the outlook for 2008 is somewhat brighter. The combination of the ending of speculation in relation to stamp duty, greater certainty in terms of the interest rate environment and a reduction in the supply of new product on the market will facilitate a more robust year in 2008. That said we do not anticipate an immediate revival in price performance, rather a gradual improvement in market sentiment and demand trends. Overall, the fundamentals underpinning this market remain sound. We have a sound economic base with a young dynamic population operating in a strong European economy, factors which will underwrite the performance of the property market in the medium term.”