LONDON/DUBLIN (Reuters) - “It was a good day,” said the man who bought Ireland’s first derelict ‘ghost estate’ at auction since the country suffered Europe’s heaviest property crash.
The Northern Ireland developer, who wanted to remain anonymous, paid 122,500 euros (99,481 pounds) for three unfinished houses and a four-acre plot of land in County Cavan in the north of the country on Thursday, telling Reuters he believes the market has hit the bottom.
He is not alone.
The Irish housing market is feeling the first twinges of recovery since the credit crisis slammed prices 50 percent lower and stopped more than 600 developments in their tracks.
In popular areas of the capital Dublin, demand is being fuelled by first-time buyers and families who delayed trading up during the price plunge and now believe values have stopped falling.
Companies like Google (GOOG.O) and Bank of New York Mellon are hiring in Dublin, adding more demand. In the meantime, supply has been strangled by a five-year construction freeze.
Buyers are now seeing pockets of recovery in a market previously dismissed as synonymous with the property binge that triggered the global credit crisis.
American Jenette DelMonaco, who works for Apple (AAPL.O), was also among 2,000 people that squeezed into the ballroom at Dublin’s Shelbourne hotel on Thursday, looking to buy one or more of the 98 properties being auctioned by Allsop that raised 12.9 million euros.
Fed up renting a draughty, single-glazed cottage in Ireland’s second city of Cork, she paid 104,000 euros for a three-bedroom light-blue painted house set in the hillside 30 minutes from the city centre. Its pre-crash price was 400,000 euros.
“I’ve been on the fence about buying for a year and a half. My financial advisor kept saying ‘just wait, just wait ... it’s going to keep going down’,” she told Reuters. “I do think the market has hit bottom.”
Chris Bell, head of Europe at property agent Knight Frank, agrees and said this summer could be “a tipping point for buyers coming back to the market”.
The company handles deals worth more than 500,000 euros and the number of transactions has doubled in the last six months versus the same period in the previous year.
Economic data also suggest a market on the turn. Irish house prices were unchanged in March compared to February, only the second time prices have not fallen month-on-month for over four years, and boosted by a 0.7 percent increase in Dublin.
Farmers and other landowners got rich in Ireland’s decade-long real estate boom before 2007, selling land to both professional and amateur developers keen to cash in by building houses, offices and shops in what appeared to be a one-way bet on rising prices.
When the bubble burst, the Irish government was forced to take an 85 billion euro bailout and set up the National Asset Management Agency (NAMA) to acquire bad loans the country’s banks had provided to fund the spree.
“There is a lot of empty stock in Ireland but it’s all in the wrong place,” Bell said, pointing to popular areas of Dublin, Cork and Galway as in particularly high demand.
Ireland’s biggest estate agent Sherry Fitzgerald has registered 2,000 new buyers this year, a 28 percent increase on last year, according to head of residential Michael Grehan.
“Transaction levels are up by about the same amount and if I had more stock that number would be higher. Ask any estate agent in Dublin, their problem is a lack of good stock,” he told Reuters, saying redbrick family homes in the Dublin 4 and 6 postcodes were among the most popular.
A recovery in Dublin could precede other parts of the country by months or years depending on the excess of empty homes, Grehan said, with the counties of Roscommon, Cavan and Leitrim in the north being the worst affected.
Pent-up demand is strong, a survey by the country’s biggest property website Daft.ie showed in February, with almost two thirds of users either renting or living with their parents.
Financial incentives around capital gains tax and the lowering of stamp duty were also helping more buyers “get off the fence”, Grehan said.
Other data suggest that while the bottom may have been reached, a full-blown recovery could be some way off. Irish unemployment, among the worst in Europe, has stayed above 14 percent for almost two years and is forecast to fall to just 11.7 percent by 2015 though employment rose for the first time in four years in the final quarter of last year.
With Irish banks just halfway through a sweeping three-year deleveraging programme, tighter credit conditions will also temper demand. Loans advanced for house purchases have fallen for 25 straight months while the value of new mortgage lending, though stabilising, is down 35 percent year-on-year.
It explains why many buyers are cash-rich expatriates, said Robert Ganly, head of residential at Knight Frank in Ireland. About 60 percent of its transactions are being done by expats returning from the UK, United Arab Emirates and the Far East to educate their children or retire, he said.
A growing sense the worst may be over in pockets of the market has prompted overseas investors, including private equity, to “stop kicking the tyres and hone in on deals”, Grehan said.
The property investment arms of Deutsche Bank (DBKGn.DE) and insurer Axa (AXAF.PA), with about 85 billion euros of real estate assets under management between them, told Reuters in March that they were looking at the Irish commercial property market with renewed interest.
“The Irish economy is at an interesting point in time to buy good assets after taking tough economic decisions early on,” Pierre Cherki, global head of Deutsche Bank’s RREEF unit said.
“We are in Ireland talking to landowners about buying residential sites rather than the stuff that comes out of NAMA that has to be on the open market,” a senior source at a listed London-based developer told Reuters on condition of anonymity because its shareholders were not aware of the plan.
Allsop said demand came from all over the world, with Internet users from 130 countries showing an interest in Irish property. Thursday’s auction saw three Asian telephone bidders for a single Dublin flat, it said.
As the buyer of the ‘ghost estate’ waited for solicitors to process his paperwork in a sunlit room overlooking Dublin’s leafy St Stephens green, his satisfaction was clear.
Leaning over to another Irish buyer he asked: “Did you get a bargain?”
Reporting by Tom Bill and Lorraine Turner; Editing by Jon Loades-Carter and Erica Billingham