Dublin home price drop signals market slowdown

DUBLIN • Some painful memories are beginning to stir in the heart of Dublin’s affluent south side.

When a five-bedroom, three-bathroom Edwardian home hit the market in September, the price was €2.5 million (RM11.48 million). Today, the red-brick abode with an 80ft long garden in the district of Dartry is on offer for €1.95 million, down by more than a fifth.

The cut reflects a wider slowdown in the Dublin housing market. The price of a typical three-bed semi-detached house dropped in the first quarter for the first time since 2015. And one agent compared the becalming of the market to the period just before it crashed in 2008, one of the worst in Irish history and a bust that ultimately forced the country to seek an international bailout.

The agent asked not to be named for fear of upsetting clients seeking to sell their homes, just as the latest boom runs out of steam. Since their 2012 low, prices have almost doubled, before levelling off in recent months. Annual price growth slowed to 1.9% in January from 13% in April, government figures show.

The price of a three-bed semi-detached house in Dublin city has dropped 1.7% since the end of December, realtor Real Estate Alliance (REA) said this week. This amounts to a decline of about €7,500, wiping out the average €7,000 gain in 2018.

“Time taken to reach sale agreed in Dublin is now eight weeks, double that of a year ago,” said REA spokesman Barry McDonald.

While homebuilders like Cairn Homes plc and Glenveagh Properties plc remain upbeat, investors are less sure. Shares in Cairn have dropped 22% since the middle of July, while Glenveagh is down 27%.

A number of factors seem to be at work. First, concerns around the UK’s exit from the European Union are taking a toll. A no-deal Brexit could cost Ireland 50,000 jobs, Finance Minister Paschal Donohoe warned this week.

The slowdown may also reflect tougher mortgage lending rules imposed by the central bank. The volume of mortgage approvals fell in January compared to a year earlier, according to Banking and Payments Federation Ireland, though figures released yesterday showed a recovery, rising 7% in February.

After years where few houses were built in the wake of the crash, supply is finally catching up, according to John McCartney, head of research at Savills plc’s Irish unit. About 18,000 homes were built in the country last year. While still behind the 25,000 needed per year, the gap is narrowing, McCartney said.

“There are numerous estimates of how many new homes are needed, but demand may well have peaked,” he said.

Prices may be coming back to reflect affordability. Values “are more reflective of what’s going on in the underlying economy, they are being driven more by fundamentals prices rather than maybe in the past”, said Kieran McQuinn, an economist with the ESRI think tank in Dublin.

Back in Dartry, Paul Murgatroyd, director of research at Douglas Newman Good Ltd, which is selling the house, is confident the house could be sold sooner rather than later.

“The interest may not have been there before, but there is good interest now,” he said. “So, it seems to have found its level.” — Bloomberg