Galway’s property growth: is it a blip? Is it a bubble? Is it bananas?

‘A bonanza . . . bananas . . . both!” says one estate agent in Galway, summing up a property market that bounced back last year at twice the Dublin rate.

The number and value of transactions in Galway city and county rose substantially last year; €242.5 million was spent in 2013, a 25 per cent increase on 2012, according to MyHome.ie, the property website owned by The Irish Times .

Yet just a month ago eight mortgage lenders brought more than 80 repossession applications before the Galway county registrar, Marian Chambers Higgins.

The picture gets even when complex when you add reports of multiple purchases in Galway by the "billionaire brothers" Luke and Brian Comer, Glenamaddy plasterers who made their fortune in British property in the 1980s, and by the agricultural-machinery suppliers Padraic and Martin McHale, of Clonbur.

“It’s like Santa came at Christmas and brought a bag of confidence,” says Niall Browne of the O’Donnellan & Joyce estate agency, who notes that the McHale and Comer interests are “mainly commercial”, with some apartment purchases also in the suburbs.

“We sold 29 residential properties in 28 days in February, and we have another 29 deposits for March, whereas last year we were selling four to five properties a month,” Browne says.

The interest is focused on particular areas, such as Salthill and Knocknacarra, on the west, and Oranmore and Roscam, on the east side, where there is a “shortage of property”.

“Think of the employment in the university, the three hospitals, in the medical-device sector, and you have people who were renting and now have the confidence to buy – partly also because rents have risen too,” Browne says.

One significant barometer reading is the fact that O’Malley Construction Company is building again, in Roscam and Knocknacarra.

The Connacht Tribune journalist Enda Cunningham, a keen observer of property in the region, says that about half of prospective apartment purchasers are investors and that about one in 10 of these are cash buyers. The "tyre kicker" viewers have been replaced by serious buyers in the "old Galway" areas of Salthill and Renmore, and in the more popular suburbs, he says.

The fact that a “repo court” is to be held every second month, to deal with repossession applications, could change the picture, Cunningham says, but lending institutions are “treading cautiously”.

Galway’s property spike is not confined to the city. Gort, in south Co Galway, recorded a 164 per cent increase in the number of sales last year – 66 compared with 25 in 2012. Ballinasloe saw a rise of 51 per cent; Tuam saw one of 43 per cent; and Clifden saw one of 69 per cent.

But there are big price disparities. This month the property register recorded a block of apartments in Clifden selling for €34,000 each, compared with €180,000 for an apartment in Galway’s docks area. A family home in Ballinasloe fetched €59,000 while a property on Lower Canal Road in Galway went for €325,000.

Galway city has one ghost estate, in Doughuisce, on the city's eastern perimeter, but unfinished houses are scattered across the region. One Labour Party local election candidate, Clement Shevlin, this week called on Galway County Council to press for some of the recently announced Government funding for such estates, to complete the "half-finished" Cúirt na hAbhainn estate, in Claregalway.

Dr Pádraic Kenna of NUI Galway law school says that the idea of a general property bubble is nonsense and that the Galway trend relates to a niche market of people who have the money to buy.

Galway city has 3,727 people on its housing waiting list. Significantly, 49 per cent of offers it made in 2012 were turned down, and 30.4 per cent were turned down last year.

The NUI Galway economist Dr Alan Ahearne says he does not regard the rising local property market as a a repeat of the last (national) bubble, which was "fuelled by credit and driven by expectations".*

“That’s not to say that there is no reason to be worried,” he adds. “During the boom years, rents fell as investors got by on the return from capital gains, whereas now we have a shortage of supply of the right type of housing in parts of Dublin and Galway.

“We also have people in their 20s who were living at home and who are beginning to move out as things begin to improve in the labour market. Eventually, banks will begin to repossess homes. If that supply is released quickly, prices will fall back again – and that could be very damaging for confidence.”

*This article was amended on March 29th 2014