Kenneth Byrne e-mailed Apartment Living asking for advice as to whether he and his girlfriend should buy a 665 sq ft two-bedroom ground floor apartment for £175,950 in Parkgate Place, a new development off Parkgate Street in Dublin 8. He wrote: "Noise should be minimal to nothing, considering it is facing on to the Liffey. The balcony is south-facing and directly overlooks the Liffey with plenty of sunlight. We are not planning to buy the carparking space which is an additional £16,000, but there are perks like the firsttime buyers' grant, fitted kitchen, fitted wardrobes and storage cupboards. Do you think it is a sound investment? Has the market gone off the boil or is the bubble predicted to burst?"
There is no doubt the apartment market has gone off the boil in recent weeks. Agents are reporting a slow-down in sales, due in part to the fact that investors are staying away as a result of the new 9 per cent stamp duty and 2 per cent anti-speculative tax on second or additional properties. According to Sherry FitzGerald's Autumn Residential Review, the drop in investor demand is "particularly notable in smaller properties like one and two-bedroom apartments close to the city centre, which has underpinned a rental inflation in the third quarter of this year". But will the bubble burst as Mr Byrne fears? And will that apartment be a good buy in the long term?
It took a month to sell a £330,000 threebedroom apartment at Seamount, off the Stillorgan Road. The agents, Hooke & MacDonald, believe it would have sold within two weeks last spring. The market is definitely slowing, especially for second-hand apartments. Agents are reporting steady but unspectacular sales with prices remaining static. This is due to seasonal factors and also because the investor market is largely out of the picture, thanks to the Bacon Report. The market is now at the mercy of the owner/occupier, who appears to be choosy when it comes to location and quality.
New apartments sell at a higher price than second-hand ones and those in good locations are still being snapped up. Last week, 70 apartments, starting at £185,000 for a one-bedroom unit and rising to more than £1,150,000 for a penthouse, were sold in one day at Mount St Anne's, a new development in Milltown, Dublin 6.
While the 30 apartments recently released at Clarion Quay in the IFSC were not all snapped up on their launch weekend - perhaps due to competition from nearby Section 23 designated apartments at Custom House Square - the majority of buyers were owner/occupiers. New and secondhand apartments in waterfront locations are still selling well as are those in areas regarded as "desirable". With owner-occupiers becoming increasingly discerning, the pressure is on developers to provide spacious and well-finished apartments. Sales are helped if there is a show apartment. Buying off the plans is not as popular as it was and the days of queuing overnight to buy an apartment are gone for the foreseeable future.
Whether the apartment is south or westfacing, the quality of the surrounding landscaping, storage facilities and the size of the apartment are important considerations.
According to Peter Wachman of Jackson-Stops, second-hand apartments originally geared towards the investor, which have no Section 23 allowances left, can be hard to sell. "You might be talking about 500 sq ft for a two-bedroom or 300 sq ft for a onebedroom and it is going to be difficult to find an owner/occupier who wants to live in that. To the owner/occupier, location matters enormously. Apartments in inconvenient locations are much too difficult to sell. In London they are now building apartments purely for investors with two bedrooms, a bathroom and a kitchen but no livingroom. That sort of investor doesn't exist here."
There is uncertainty over how the market will pan out over the coming years, which means now could be a good time to buy. While a number of new developments will come on stream early next year, the long-term supply is in doubt.
"Building costs are absolutely going through the roof and building land has dropped back in value," says Ken MacDonald of Hooke & MacDonald. "Builders are not going to build developments unless they get certain prices and a lot are going to hold back on developing sites until they see it more feasible to do so. "The next three months could be the best time if somebody wants to buy, because prices are increasing at a very low level. We couldn't sustain the level of increases over the last three to four years so the slowdown is good for everybody. There is now more sanity and people have a chance to buy."
Seasonal factors have affected the slowdown with some buyers waiting to see what comes on the market in the new year. While many of the developments coming on stream in the next few years are likely to be high density and high rise, they could fuel competition from some of the estimated 50,000 people arriving here every year.
However, with a chronic shortage of rental stock due to the anti-investor and anti-speculative measures, the Government may be forced to do a U-turn and provide incentives to bring the investor back into play. Whether or not this happens, apartments close to the city centre will continue to sell, says Eunan O'Carroll of Gunne Residential.
"When you consider the population is set to increase over the next five years, it can be seen that apartments well located in the city will continue to be in strong demand."
