Property owners urged to review insurance policies as cost of rebuilding home goes up

THE cost of rebuilding a home has gone up, prompting warnings to property owners to review their insurance cover.

Higher rebuilding costs could also lead to an increase in home insurance premiums, experts said.

The Society of Chartered Surveyors Ireland said the national average rebuild costs have increased by an average of 4pc this year in 2015.

Its Guide to House Rebuilding Costs, which is used by homeowners to calculate the rebuilding cost of their home for insurance purposes, shows that costs vary significantly depending on location.

In Dublin, the average rebuilding costs on a standard home increased by 3pc. For a standard three-bedroom semi-detached house that means it now costs €178,000 to rebuild it.

The average minimum rebuilding costs for a standard house in Cork and Limerick increased by 5pc.

Andrew Nugent, president of the Society of Chartered Surveyors Ireland, said: “The key for homeowners is to check that their house rebuilding costs – the reinstatement costs involved in rebuilding a house in the event of a catastrophe such as a fire which are required on all home insurance premiums, are adequate and fully in line with current figures.”

He said homeowners need to check the “sum insured” on home insurance premiums to ensure they are fully covered and not over or underpaying. 

Market to Remain Positive in 2015

According to the official CSO index residential property prices rose by 12.3% in 2014 and increased by as much as 21% in Dublin. However the CSO also indicates that prices fell by 1.4% in January and by 0.4% in February.  So where is the market expected to go in 2015?

The fall in house prices in the first quarter of 2015 was led by a fall in prices in Dublin where affordability was becoming stretched. House prices in Dublin are 5.9 times the average wage compared to 3.9 times in the South East. Outside of Dublin however both MyHome.ie and Daft.ie have recorded an increase in asking prices in the first quarter of 2015 with asking prices in Co. Waterford 12.2% higher than in Q1 2014.

It is unsurprising that the property market has calmed down somewhat after the ‘mini bubble’ that appeared in the second half of 2014. The end of the capital gains tax exemptions, which may have temporarily inflated demand last year, has reduced the number of investors currently in the market. In addition the new Central Bank’s mortgage lending rules have reduced the affordability of second time buyers in particular.

The number of sales completed is up significantly in 2015 compared to the same period in 2014. According to the Property Price Register nationally the number of transactions completed in the first two months of 2015 is up 44% on the corresponding period last year. The number sales closed in Tramore in the first quarter of this year is up 52% on the same period in 2014. However with the conveyancing process often taking up to three months to complete it is reasonable to assume that most of these deals were actually agreed in the latter part of 2014.

In summary there appears to be the continuation of a two speed property market in this country, which has been the case for a number of years now. Property price growth has slowed in the capital with some evidence of falling prices. But the property market cycle in the rest of the country lags Dublin by 9 to 18 months and as yet there is no evidence to suggest that local property prices won’t continue to increase in 2015, albeit at a lower rate than last year.

Barry Herterich BA MIPAV REV

Supply Shortage Slows Momentum

After a number of false dawns in 2012 and 2013 the property market improved significantly in 2014, much to the relief of everybody involved in the industry. The number of property transactions improved markedly over previous years, albeit from a low base, and agents found that properties that had been on the market for a number of years were suddenly getting offers. The second half of 2014 was particularly good as investors tried to secure deals before the expiration of the Capital Gains Tax incentive and many first time buyers acquired houses before the imposition of new deposit requirements.

Going forward, in the short to medium term, it is clear now that a lack of supply, which has been a problem in Dublin for a couple of years, is now a significant problem in Waterford city and county.  The ‘run’ on houses in the second half of 2014 has resulted in agents’ overhang of stock from the dark days of 2009 to 2012 being cleared. The lack of new houses coming on the market is due to a number of reasons such as negative equity and the requirement for second time buyers to have a 20% deposit. Also a lack of supply accentuates the supply problem itself because if owners don’t see a house that that want to trade up or down to then they won’t put their own house on the market.

One way to solve the problem is to get builders building again. With many solvent builders in operation, more finance on offer and cheap development land available why are we not seeing housing developments under construction? The simple answer is that it’s just not viable to build at the moment. Whilst prices increased in Waterford last year the rate of price growth in the medium term will probably not be sufficient to get builders building. What is required is a reduction in the cost of building. It’s estimated that almost 45% of the cost of a new home goes in taxes. These taxes include VAT on the sale price of 13.5%, development contributions to the local authority and the cost of Part 5 (Social and Affordable Housing). In addition, the new building regulations that came into force last year are estimated to add up to €18,000 to the cost of building a house. All these costs are ultimately passed on to the buyer, the consequence of which is that the price that a builder would have to set for a new house is unaffordable.

When the Government talk about strategies at solving the housing shortage, the reality is they don’t have to look too far to find the solution.

Barry Herterich BA MIPAV REV

Central Bank announces new regulations on residential mortgage lending

The Central Bank of Ireland today (27 January) announced the introduction of new regulations which will apply proportionate limits to mortgage lending by regulated financial services providers in the Irish market. The key objective of these regulations is to increase the resilience of the banking and household sectors to the property market and to reduce the risk of bank credit and house price spirals from developing in the future. It is expected that the regulation will be introduced under legislation in the coming weeks.

The measures introduce proportionate limits for loan to value and loan to income measurements for both primary dwelling houses and buy to let mortgages. The limits are supplementary to individual banks' credit policies and are not designed as a substitute for lenders’ responsibilities to assess affordability and lend prudently on a case-by-case basis.

Loan to Value (LTV) for principal dwelling houses (PDH)

There are different limits for different categories of buyers: 

·         PDH mortgages for non-first time buyers are subject to a limit of 80 per cent LTV.

·         For first time buyers of properties valued up to €220,000, a maximum LTV of 90 per cent will apply. For first time buyers of properties over €220,000 a 90 per cent limit will apply on the first €220,000 value of a property and an 80 per cent limit will apply on any excess value over this amount. 

·         The cumulative monetary value of loans for principal dwelling purposes which breach either of these limits should not exceed 15 per cent of the euro value of all PDH loans on an annual basis.

Housing loans for borrowers in negative equity who wish to obtain a mortgage for a new property are not within the scope of the LTV limits.

Loan to Value (LTV) for Buy to Let mortgages (BTLs)

·         BTL mortgages are subject to a limit of 70 per cent LTV.

·         This limit can only be exceeded by no more than 10 per cent of the euro value of all housing loans for non PDH purposes during an annual period.

Loan to Income (LTI) for PDH mortgages

·         PDH mortgage loans are subject to a limit of 3.5 times loan to gross income.

·         This limit should not be exceeded by more than 20 per cent of the euro value of all housing loans for PDH purposes during an annual period.

Switcher mortgages and housing loans for the restructuring of mortgages in arrears or pre-arrears are not in the scope of the Regulations.

Sale of Development Site at Custom House Quay and High Street, Waterford.

Property Partners Barry Herterich are pleased to announce the sale of the former An Post Sorting Office at Custom House Quay and an adjoining building on High Street, Waterford. The property was sold by public auction in conjunction with Munster Property Auctions at the Rochestown Park Hotel on the 3^rd December.

The sale of this property is another boost to this area of Waterford city and the quays  which has seen the rejuvenation of several major buildings in the last few years.  The site area measures c. 0.37 acres and comprises two adjoining properties which link Custom House Quay and High Street. 

Located in a pivotal location with frontage and direct access onto The Quays along with access to High Street at the rear, the area in general is the focal point for a number of shopping and tourist attractions including the Waterford Crystal Showrooms, the Bishop’s Palace, Reginald’s Tower, the Medieval Museum and the renovated Theater Royal.  This is also the principal retail location with Arundle Square shopping centre located to the rear of the property.

Economic growth to boost property market

Recent economic data showing that Ireland’s economy is now expanding seven times faster than the European average and at a pace not seen since 2007 should ensure the continued recovery of the property market over the next number of years. With Ireland’s growth forecast upgraded from 2.1% only last April to 4.5%, an increase in employment, reducing emigration and higher disposable incomes should ensure increased demand by young workers to get a foot on the property ladder.

As first time buyers enter the market in increasing numbers and with no new homes being built locally, owners who bought their starter homes ten or fifteen years ago will have a greater opportunity to trade up as they find there is more demand for their homes. Eventually, the demand at the lower end of the market feeds to the higher end. In Tramore, only seven houses sold in 2013 over €250,000. I would expect the figure to be twice that by then end of 2014.

The improvement in the market is evidenced in the Property Price Register where the number of houses sold in the first eight months of 2014 is up 25% on the corresponding eight month period in 2013. In addition, the total euro value of sales in this period increased by 22%. This is partly due to the fall in the proportion of sales made up of holiday homes.

What is happening locally can often be at odds with the evidence produced in national house price reports. For example, figures released by Daft.ie last month showed a fall in the asking price of houses of 3.7% in Waterford city over the last twelve months and a fall of 1.5% in Waterford County. Our experience in Tramore on the other hand is that asking prices and prices achieved have increased, albeit marginally, over the last year. The housing market is full of micro markets and all that really matters is what is happening in your area.

Barry Herterich BA MIPAV REV

Tramore Property Market, Prices begin to grow again

After over 6 years of declining prices , the Tramore property market is finally growing again.

Barry Herterich, Tramore auctioneer, told the Munster Express last week the prices were growing in low digit numbers in the past few months in comparison to a year before.

One of the best performing segments is that of holiday property, where prices have risen 5-10 per cent and are selling at between 50 and 60,000 euro for two bedroom apartments.

A shortage of stock for sale is an issue.  Buyers tend to be  from the couinties along Dublin Waterford  motorway, such as Kilkenny, Carlow and Kildare as well as Dublin.

There had been many properties sold in Pebble Beach in recent years and a supply shortage has forced prices up.

Some emigrants are also buying property and are cash buyers.  These properties are then rented out with the parents managing the property, until son or daughter returns when the job market improves back home.   This is their first step on the property ladder and are doing it now that the market is beginning to turn in a positive fashion.

First time buyers are also  active in Tramore with 4 and 5 bedroom semi-detached homes the most popular, these are selling at 150-175,000 euro in the Ring Road area.  Sample estates that are doing well are Ballycarnane Woods, Clarinwood, Meadowbrook and Moonvoy Valley.

Three bed semis are at 135-145,000 euro .

These properties tend to people in steady jobs, like the public sector and get full mortgage approval, Barry notes however that in some cases, a full drawdown may not be done, as buyers are still very careful when taking on debt.

The market at house prices over 250,000 euro is seen as slow, with a few trading up from smaller properties but there are not too many.

The other active sector is what Barry describes as doer uppers in the lower price levels

Tramore does not have too many in the under 100,000 euro segment in like Waterford city, where there is large quantity of terrace property in the city centre.

But small town houses in the 80-120,000 euro range are in demand and some buyers are spending money doing them up.  These are properties in the older parts of Tramore.

On the commercial side there have been a number of significant deals agreed in the last year but due to the fact that these are predominantly bank sales the sales have yet to close.

There are two pubs currently on the market namely the St. Leger at a price of 160,000 euro and the Powers pub on Queen St., Tramore, popularly known as Marthas.  This was a very popular haunt during Race week, but sadly Martha died over a  year ago.

An offer  has  been made on the Grand Hotel but there is no official announcement yet  from Purcell Properties regarding this sale.