Monday, January 24, 2011

What's a house worth now: does anyone know? - The Irish Times


With no national house price register available to help homeowners, working out how much your property is really worth can be tricky – if not impossible

LIKE MANY neighbourhoods around the country, Charlesland in Greystones, Co Wicklow could be renamed Walter Mittyland, such is the huge disparity in the asking prices of houses in the area.

When Keith Slowey and his wife, Genevieve, put their three- bed end-of-terrace on 89 Charlesland Grove on the market in October at an initial asking price of €310,000 (now reduced to €295,000), a three-bed mid-terrace house nearby was asking €345,000 while another three-bed, also mid terrace, in the area was €485,000.

There are lots of properties in Charlesland on the market and according to Keith Slowey, “the price range is crazy”. Two-bed houses predominate in the estate and some are asking more than nearby three-beds.

The houses are being sold by investors bailing out of the market and owner-occupiers looking to migrate down the N11 towards south county Dublin where properties are now more affordable.

The Sloweys are looking at five-bed houses in Delgany that cost €1.2 million at the peak but are now just over €500,000.

Before deciding what to ask for his house, Keith studied similar houses in the area on which he says was helpful, but a little misleading.

“All you are seeing is the prices people are looking for, not what they are actually getting.” With no house price register and a lack of transparency surrounding selling prices due to data protection legislation, confusion and denial reigns.

Some vendors are clinging to the vain hope that someone will love their property enough to meet their asking price, even it’s substantially more than their neighbours are asking for a similar property.

Charlesland was built in several phases and the asking prices in some cases reflect the prices originally paid. While the Sloweys bought their house in 2005 in an early phase of the development for €385,000 and will make a substantial loss of around €90,000 if they sell at the current asking price, they have good savings which will make up the loss.

“Some people who bought in later phases paid €525,000 for the same house and probably can’t afford to drop below a certain asking price.”

Little did vendors and estate agents know when properties were flying out the door at the peak of the boom that life was about to get so complicated. Now, with far fewer transactions to facilitate comparisons and no national house price register available to help homeowners assess the value of their own property, working out how much a house is worth can be like nailing jelly to a wall.

While the Government has promised to establish a national property price data base, this is unlikely to be set up in the short term. It’s dependent on the fate of the Property Services (Regulation) Bill 2009, which came before the Dáil in November but looks increasingly unlikely to be passed before an election is called.

For now, house prices remain a private affair between the buyer and the seller and their agents, the exception being prices achieved at public auctions. However, with so few of those happening, auctions can no longer be relied on to provide an accurate picture of values in any given area.

One of the problems is that while we know prices have taken a nosedive since the peak, the exact amount by which they have fallen is up for debate. The latest Permanent TSB/ ESRI house price index says house prices fell nationally by a further 3.5 per cent in the last three months of 2010, putting the fall since the peak in 2006 at 38 per cent.

But different house price indices tend to come up with different figures and often don’t take into account the nuances of local markets.

Low transaction levels – the country largest estate agency chain, Sherry FitzGerald estimates says the number of homes it sold last year, was down 55-60 per cent from the peak year of 2006 – have meant that it’s difficult even for estate agents to get a handle on values in some areas and even when they can glean some prices from other agents, sellers expectations and personal circumstances also come into play.

Against this backdrop of low activity, agents also find themselves having to appeal to sellers to be realistic about price, says Gunne director Declan Cassidy, who operates from the agency’s Fairview branch.

“You can show them (the sellers) asking prices for similar properties in the area, and they might say they want to be realistic, but if another agent says they’ll get them a higher price, they often go with them. A few months later and it’s back down in price.

“It’s all about getting them to believe the facts. For instance, if they know their neighbour sold at €325,000, why do they think their house is going to get €375,000? If they price it right in the first place, the get viewings, and once viewings start there’s more chance of getting bids.”

Vendors tend to be more realistic when they need to sell quickly but not everyone is in a hurry to sell. Estate agent Owen Reilly who specialises in docklands property, says that some owners are happy to leave their property on the market, at an unrealistic price, for months, even years. “This is creating a false impression of the market, that nothing is moving.” he said.

Some vendors may well be just testing the market, while others are putting property up for sale as an exercise to appease their bank, but at a price at which they know is unlikely to attract bids.

In some cases where properties sell after a long period of being on the market, the neighbours can be shocked to discover the eventual price, which may be far below the asking price, and far below what they reckon their own home is worth. These slow-to-sell properties often undergo gradual under-the-radar price drops and eventually sell at a fraction of the start-off price.

Price is the first thing most buyers notice. Sellers can be reluctant to commit to an asking price they feel doesn’t reflect the special features or standard of their property, but the anecdotal evidence is that they won’t get viewings unless they are prepared to compromise. While the size, condition, orientation and parking all have a bearing on what is being asked, ultimately says Reilly, it’s a numbers game. “It’s all about encouraging viewing and activity.”

Agents are saying that while there’s a perception that nothing is selling, when a buyer feels there is value they act quickly.

Declan Cassidy subscribes to the theory that selling houses is about getting people to viewings. “If a number of people turn up to view a house, it’s a comfort to each one to know that they’re not the last buyers out there.”

It’s easier to value property at the lower end of the market, where activity is stronger. “People will see a ‘sale agreed’ sign around the corner, and will phone us and ask us to come out and do a valuation on their house.” says Declan Cassidy. It gets trickier in areas where there haven’t been many recent transactions or where there are one-off properties, often in upmarket areas. “If you are going into an area you are not familiar with, there’s a good chance you will get it wrong unless you do your homework,” he says.

James Barber, who is selling a three-bed apartment at 125 Longboat Quay on Grand Canal Dock, says while his apartment is bigger than average – and is spread over two levels with some lovely features including swish bathrooms with underfloor heating – he came to the conclusion that he couldn’t assume that buyers were paying attention to the finer details. He accepted the estate agent’s advice to set an asking price that would generate viewings. “I did my own research as well and looked at Daft and, comparing my apartment with others.” His apartment is unusually spacious, with all mod-cons, but doesn’t have parking or a view of the dock and is on the ground floor. While he is asking €390,000, another much smaller 81sq m (872sq ft) two-bed on Longboat Quay but with waterfront views and parking is asking €495,000.

Barber has had over 30 viewings, by a mix of Irish people, Zimbabweans, South Africans, Chinese and Polish people, “but only two or three silly offers”. Barber’s agent, Owen Reilly, says: “If you were just talking about price per square foot the asking price should be higher but you have to put yourself in the buyers shoes and take into account that there is no parking”.

So how do agents value property in areas where they’ve had few transactions? They are saying that while the lack of price transparency makes life difficult, there’s more co-operation now between estate agents, who are helping each other with price comparisons .

“They won’t give you the exact asking price but you probably get fairly good idea,” said one director of an estate agency chain with several branches in Dublin. Big estate agent firms can have an advantage because there are more transactions which can be used for the purposes of comparison.

But even for the bigger agencies it can be difficult to get a direct or similar comparison, particularly where a property is unusual or has a quirk, and in the past these would have gone down the auction route to find their value in the marketplace. Declan Cassidy says agents can build a picture of values by talking to people – even people on their list who haven’t bought from them but who will often disclose how much they paid for another property.

However, even the most savvy agent can find themselves have to re-evaluate rapidly. This has been happening in neighbourhoods where receivers have been called in to dispose of distressed properties. A recent case was the sell-off of a block of apartments on the southside, called Booterstown Wood, at prices that were less than half those originally asked by the developer. “Overnight it established a new value for that kind of property and in line with that I had to adjust the price of a property I had for sale nearby.”While big receiver sales can force people to re-evaluate asking prices in an area, individual vendors who drop the price of their home to a new low level can come in for stick from their neighbours.

Keith Slowey says he was approached by another seller in Charlesland who said his strategy to undercut the market, was “dragging everyone else down. But the way I look at it, it’s all about who can afford to sell and get out quickest”.

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