Short Supply, Huge Demand

14 November 2016

The scale and speed of sales at new homes launches generally act as a good barometer of the health of our residential market as a whole. So, when buyers start queueing at 3am on a glacial November night to secure a family home, you know the market still has a way to go to right itself. 

Such was the case last weekend at the first phase of 16 homes released for sale at Stonebridge, a development of 66 three and four-bedroom semi-detached homes priced from €278,000 in Ratoath in Co Meath. 
 
“We knew there was interest in the scheme because of the level of enquiries ahead of the launch, but we didn’t anticipate people would queue from 3am for a 2pm opening,” said Catherine Noble, head of marketing at Knight Frank, which handled the sales.
 
“Sixteen sold on the first day and we’ve released another six to the market this weekend with scheduled completions from February. Additional phases will be released later next year,” she said.
 
According to Noble, as soon as activity is noticed or hoardings are put up on site, agents are getting enquiries from would be buyers looking for information, such is the demand for homes, particularly in Dublin.
 
Knight Frank and Hooke & MacDonald agents have experienced the same phenomenon with regard to Marianella, the eight-acre former Redemptorists site in Rathgar where Cairn Homes is building some 275 apartments and houses, which is scheduled for completion in 2019.
 
And certainly the new homes sector’s increased activity and confidence levels this autumn were given a boost in the month since Budget 2017 with its introduction of the Help to Buy scheme.
 
According to Construction Information Services, which tracks all residential and commercial planning and commencement applications nationwide, some 465 new homes projects were started around the country in the last 12 months to build more than 16,000 units.
 
The majority of those projects are in Dublin (188 projects) and Cork (76), which are leading the charge in terms of new build projects, albeit still well below what is currently needed.
 
In Dublin city and county, almost 9,400 homes are being built as part of those 188 projects. Admittedly, some are in small infill sites, but there are larger schemes too, although many have completion dates ranging from early next year to 2019.
 
The largest and most expensive of the current live projects is Chartered Land’s €180 million development of the old Clyde Court and Ballsbridge hotels site on Landsdowne Road where Joe O’Reilly and an Abu Dhabi investment group are building some 592 units, which are scheduled for completion in early 2018.
 
Another 275 apartments and houses are planned for Marianella as mentioned previously and 260 units are just underway at Tom Kelly House on Charlemont Street, an €85 million regeneration project in Dublin 2.
 
In Dun Laoghaire, 197 apartments are due for completion next May at Block B at Honeypark, and another 225 homes should be complete at Diswellstown in Castleknock by the end of next summer.
 
Cork’s new homes market is also recovering with a few larger scale schemes coming on stream. That market has seen the return of a number of well-known players such as the O’Flynn Group building in the city again.
 
Paul Hannon, director of Sherry Fitz-Gerald’s new homes division, which is handling sales at O’Flynn’s current schemes, said: “We’ve seen an increase in the number of homes released for sale over the last six to nine months and in some cases, where the developer is well known, there have been some off-plan sales. Buyers are still wary of off-plan purchases, but tend to do so when they’ve missed out on the latest phase of homes built on the site.
 
“There is a slight anomaly in terms of real numbers of new homes across the country in that some launches are not of brand new builds, but are in schemes that may have become ghost estates following the recession, were then bought out and completed by a third party such as Nama and have now come to the market. They are new homes, but not technically new builds and buyers should be aware that they may not all adhere to the latest building guidelines, particularity in terms of energy efficiency,” said Hannon.
 
Overall, Hannon said the new homes sector is a positive news story in that his agency has had up to 60 transactions of new homes – and not from old stock – in the last few months and has had in excess of 120 new homes sold to date in Cork this year.
 
“Ballincollig is really the first-time buyer market in Cork city and we have about 85 per cent of buyers and sales there with average price points of about €310,000 to €315,000 for three-bed homes (up from €295,000 in June) and from €340,000 to a current €360,000 price point for four-bed semis,” said Hannon.
 
“Demand is location driven, and is very high around the city centre and suburbs and key metropolitan areas. Kerry Pike is 2km from Apple, which employs thousands here. Rochestown is also popular. It’s one of the city’s biggest residential areas. It was farmland 15 years ago.
 
“However, a limited number of investors are purchasing new homes and that cohort is put off by tax restrictions and the difference between gross and net returns,” said Hannon. New homes specialist Ken MacDonald, head of Hooke & MacDonald in Dublin, said similar.
 
“Minister Coveney is doing all he can to free up logjams in the property sector at the moment and it is welcome, but a few areas still need attention,” he said.
 
“There is huge demand for new homes, both three and four-bedroom houses and apartments in areas with good transport networks. The problem is, there is no choice for buyers and so few units are being built. 
 
“That is mostly because of building costs,” said MacDonald. “About 40 per cent of the purchase price of any new home, whether it’s a house or an apartment, is non-construction related, which makes building unviable fordevelopers.“New apartment blocks are also needed for the rental sector, the build-to-rent sector, where there’s strong growth as long as the conditions are there for builders and investors to initiate those projects. So, overall, we
need to introduce incentives for long-term development.”
 
About a third of all buyers are estimated to be first-time buyers and new home buyer profiles run the gamut of young professional couples to older professionals in their 30s and 40s with families who missed out on buying in the last property bubble; who emigrated and have now returned with money to buy; or who work in the IT sector and can afford to buy more expensive new-builds in the €1 million bracket. And then there are the downsizers, who are ready to leave large, older homes to retire to smaller, more energy-efficient homes or apartments.
 
The majority of new homes launched recently are three and four-bedroom homes and, according to Knight Frank, very few are for sale in Dublin for less than €300,000.