AS WE KEEP hearing, much of Ireland’s economy has been placed in a type of hibernation in the face of the Covid-19 crisis.
While it pales into comparison in the face of the human toll of the virus, there are some dire economic forecasts about a recession and potential job losses.
Each sector is facing its own specific challenges but the housing market is one that has been brought to an abrupt halt following a strong start to the year.
Various house price registers had shown steady signs of growth in the early part of 2020 as uncertainty surrounding Brexit lifted.
MyHome.ie published its quarterly report over the weekend, showing a 0.7% increase in the price of an average home and a 6% increase the number of transactions taking place.
The Real Estate Alliance published similar stats on Monday, noting that the average time it takes to a sell a home had fallen to eight weeks. It was nine weeks at the beginning of 2019.
All of these indicators suggested a market that was growing, with supply remaining low relative to demand.
“The calls were hopping in January that people wanted to buy new homes,” David Browne of real estate firm Savills Ireland told TheJournal.ie.
“So it was shaping up to be a very strong year in new home sales, but obviously that has softened and we really need to see what we’re looking at now. It really depends on how long the lockdown is or how long we’re in this state.”
Browne adds that people who needed homes before the crisis will still need homes afterwards, but that there could be a delay before any meaningful number of transactions takes place.
He says the company sold two units yesterday and fourteen last week but that this nothing like the rate of 1,000-per-year that would usually take place.
“There’s nothing like the volume that we had, say three weeks ago. Obviously people are pulling back and taking a ‘wait and see approach’ and that’s completely fine.
The analysis so far we have from ringing our buyers or potential buyers, is they’re not ready to commit now. They’re going to wait until this passes and then re-engage. That’s the majority out there, but there is a minority there that actually wants to proceed.
“Transactions have come down dramatically, it’s definitely going to soften. And the amount of calls, inquiries, everything has come down,” he adds.
In the MyHome.ie report, chief economist at Davy Colm MacCoille noted that the dropoff in transactions is likely to create “an illiquid market” that could kill off the green shoots from the early 2020 housing market.
“In this context, our forecast for 2% Residential Property Price Index inflation through 2020 now looks optimistic,” MacCoille added.
Supply
While talk of stagnation in the price of houses may be music to the ears of some, one of the problems is that it could also suppress supply.
Barry McDonald of the Real Estate Alliance is remaining optimistic that the Central Bank’s lending restrictions will guard against any wild swings in the market, but he acknowledges that the shutdown could affect the supply of housing.
“There are building sites out there and there is building going on, but not right now of course with the lockdown
I suppose a shock to the market like this may result in a continued slowdown. Maybe there were certain sites that were due to be opened up and perhaps the developers, like buyers, will take a wait-and-see approach and that’ll in turn limit supply and unfortunately that could be an issue for buyers.
Speaking about those loan-to-value and loan-to-income limits set by the Central Bank, McDonald believes they should mitigate against any wild falls.
“The rules that were put in place have definitely put us on a stronger position than obviously where we were when the credit crunch came in 2008, when people were overborrowed,” he says.
We don’t have the huge number of small-time investors in the market anymore. They’ve gradually left the market over the last 10 years, by and large, of course. So we’re just in a stronger position to withstand a shock to the system, like the one we’re having at the moment.
Sellers are trying to develop more inventive ways to keep sales happening in these difficult times, with virtual viewings and online selling becoming more prevalent.
Savills has launched a new platform that not only allows prospective home buyers to take 3D tours of a property but to also speak to sales agents on a live chat feature.
People can even book a virtual viewing slot so they can make sure there’s an agent available when they take their tour.
“You can be looking around the house and also talking to the sales team because obviously the sales team are all at home,” Browne says.
And we’ve a click to purchase functionality, particularly when all the solicitors are closed and you can’t physically get to your solicitor to sign a contract. You can do it all digitally on this platform.
Moving in
Even then there are of course major hurdles, with the widespread use of such a system likely to be more experimental than a long-lasting change of practice.
Browne even acknowledges that “physically getting the keys” to the buyer remains an issue.
There are other problems too though. While buying a house remotely may be feasible when it comes to a new-build, where buying off plans is even common, buying second-hand homes probably requires an in-person viewing.
This doesn’t even touch on the problem of buying a home that will require building work before a move happens. With all-but-essential building work currently halted across the country, such transactions are likely to become similarly stuck.
Even people who’ve bought homes way before the current circumstances are facing problems.
One such person told TheJournal.ie that, after buying a home last August, they are now waiting indefinitely on the completion of building works before they can move.
Niamh Mongey said she and her partner are lucky that they have somewhere to stay in the interim, but that last Friday’s measures have thrown a large spanner in the works.
“We were very, very near the finish line in terms of getting to move in. We’ve been kind of renovating it since January and it was going ahead with some delays, the ones you’d expect when renovating a house. We were probably two to three weeks away from getting to start moving our stuff in and the builder was to be finishing up this week.
Then we got to Friday night and we realised that any kind of work that was building-related could only go ahead if it was essential. So for our builder, he’s obviously private contractor, but wasn’t available wasn’t able to get any of the supplies required to actually finish the work. So now we’re basically stranded for an indefinite amount of time until the suppliers and builders can get back to normal.
“We’re one of the luckier families, there’s plenty of people out there in worse circumstances than us, but there’ll be a massive delay.”
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