This month is Guaranteed Irish Month, and we’re delighted to discuss the key issues in this sector with our Thought Leader Joanne Geary.
Joanne is Managing Director of MyHome.ie, now part of the Irish Times group. Joanne previously worked at board-level marketing and business development roles in global and Irish professional services organisations such as Savills plc, Cushman & Wakefield and Sherry FitzGerald Group. Joanna, very kindly agreed to answer some questions about the seriously challenging issues that face us in today’s Irish construction sector. Here is what she had to say …
Tell us a little bit about your own background and what has influenced your leadership style today?
Well, I grew up in West Limerick , the eldest daughter of a family of 5 and learned from early on in the family farming business that hard work and taking responsibility were a recipe for success. Us Gearys are a large family with lots of connections and relations which also taught me the importance of relationships and having the personal touch in how to manage a team and a business.
How did your career progress from there?
My property career started in 1997 when I joined the Dublin Docklands Development Authority as Marketing Lead. Over the 25-year period since then I have lived and worked through many major events which have had a significant effect on the Irish property market; from the foot and mouth crisis and Celtic Tiger years, to the Recession, our ongoing homelessness crisis and more recently the pandemic.
It’s fair to say that I have only ever worked in a dysfunctional property market and as such, nothing surprises me. I don’t think of the property market as a market per se, but as a system. When parts of the system are not working, like policy, planning, finance, supply or labour, the cogs in the wheel stop turning and the system grinds to a halt.
To get the property system working again, there needs to be sustained work on the blockers in the system, which takes time and political will. These are often the things that are out of your control!
What ongoing effects to the property market do you think can still be felt today by the crash in 2007/08?
During the boom, many buyers had overleveraged themselves to buy into a market at inflated prices. This meant that when values took a hit during the downturn, many of these buyers were left in negative equity.
Now, 15 years on from the start of the Recession, many homeowners who could keep up with repayments have made steady in-roads into their mortgages. Most of the country has experienced a post-pandemic pricing surge, with property values returning to close to the 2005/2006 level.
One of the positive impacts of the crash has been the tightening of the macro-prudential lending rules by the Central Bank. This limits the mortgage you can borrow at four times’ income for first time buyers and 3.5 times’ for second and subsequent borrowers with a 10% deposit required for each cohort. This one initiative alone has thankfully limited our ability to overstretch financially.
The government have introduced schemes like Help-to-Buy and First-Home-Schemes to help first time buyers. What impact have these had on the industry in the past 3 years, and is there more the Government can do to support buyers?
First-time buyers would typically make up about half of all the buyers in the market in any given year. There is no doubt that both the Help-to-Buy and First Home schemes have had a positive impact in alleviating the burden on first-time buyers to help get them on the ladder. These schemes have provided financial assistance for these buyers by assisting with the affordability obstacle thereby increasing home ownership while also serving as a stimulus to the new homes market. However, more needs to be done for those buyers who are not eligible for these schemes and for those looking to avail of social and affordable housing.
Myhome.ie regularly releases property reports in association with Davy. Tell us about your findings in the Q2 2023 report, and what they mean for the market through the rest of 2023 and into 2024.
At the mid-point of this year, the market was showing signs of stability despite interest rate hikes. The main findings of the report included:
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Annual asking price inflation was running at 2.2% nationally
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Homes were being sold for 1.4% over asking price versus 5-6% at the same time last year
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Demand remained particularly strong, with the value of mortgage approvals at record levels and average time to sale agreed close to historic lows
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Supply was an ongoing issue, with 6,000 fewer properties on MyHome.ie compared with pre-pandemic levels
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Housing starts compared favourably with the same period in 2022, with an increase in activity almost entirely reflecting Dublin apartment construction
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The Central Bank’s new lending rules for first-time buyers, ongoing Government supports and continued robust demand mean Ireland compared favourably to other markets such as the UK despite interest rate hikes.
After reporting a falling rate of price inflation for three consecutive quarters, it was encouraging to see the second MyHome.ie Property Price Report of the year bucking the trend.
A quarterly inflation rate of 4% pointed to a certain amount of momentum in the market, but it’s important to remember that we are still operating in a dysfunctional market in terms of supply and the prospect of further ECB rate increases meant we kept our asking price inflation forecast for 2023 at 1.5%.
Stock levels are a constant concern and they are still far too low, but it was very encouraging to see housing starts for the first five months of the year up considerably compared to the same period last year. As always, we need to see sustained homebuilding in order to meet the strong demand that persists in the market.
It was worrying to see rental prices continue to rise, and we hope to see additional supply curb these increases in order to bring some stability to the market.
There has been ongoing rumours and articles about the “housing bubble” bursting again. Do you think this is likely to happen in the coming years? If so, why? If not, why not?
It’s unlikely that there is an Irish property market boom and bust scenario ahead of us, for a few reasons. First, demand remains buoyant given the resilient performance of the Irish economy. Second, housing supply remains very constrained. Third, the European Central Bank is not expected to raise interest rates as aggressively as the Bank of England or Federal Reserve. Fourth, the decision by the Central Bank of Ireland to loosen mortgage lending rules will, in time, put upward pressure on house prices.
However, we have revised our forecast for asking price inflation for 2023 to 1.5% – from 4%. This small rise could quite possibly split between falls in the capital and modest price gains in the rest of Ireland. However, the outlook is very uncertain and small price falls can’t be ruled out.
Why? Asking prices have clearly had a weak start to 2023. Also, the correction in stretched valuations in some areas looks to have further to run. However, as 2023 progresses the tight market, resilient economy and, crucially, the easing of the Central Bank’s mortgage lending rules should support Irish house prices.
Retrofitting has become hugely important to bring older houses more in-line with brand new ones on energy & safety ratings. What advice would you give to homeowners unsure about how to begin their retrofits or what they need for it?
Energy costs and retrofitting have become very important to buyers. In our most recent Consumer Sentiment Survey in February, over 60% of respondents told us they were concerned about energy costs when searching for a property, a higher percentage than those concerned about rising interest rates.
On MyHome.ie we have also seen a 45% increase in searches of BER rates on properties. As a result, we are in the final stages of rolling out a new feature on our second-hand brochures on the website which will offer buyers more information on annual energy running costs and also how they could retrofit and improve their BER rating. This new tool also provides information on grants and green mortgages and how to apply. Watch this space!
The number of “young homeowners” (25-34) has dropped from 60% to 27% between 2013-2023. What more can be done to assist younger people in purchasing their own homes, and reduce the emigration rates in turn?
The solution is to increase the supply of homes for all types of tenures. There has been a lot done to support demand such as the Help to Buy and the First Home schemes, but the Government needs to turn its attention to how to increase the quantity of supply coming to the market.
Joanne will be attending the Guaranteed Irish annual Construction Forum on Wednesday 27th September. For more information click here.