Galway City first timers priced out
THE MARKET SOMETHING just had to give in Galway City and it is the western capital’s young people who are being squeezed out in numbers by increased competition for home purchases and rentals amid worsened scarcity.
An expanding local population, an increasing number of cash wielding returnees from abroad, employment immigration and higher numbers of outside investors for their college going kids, are all scrummaging for a static pool of properties.
It means prices have increased by 11pc following on 10pc the previous year; slightly higher than predicted by our experts O’Donnellan & Joyce. And values of family three and four beds are up slightly more again — by 12pc. To put it in perspective, a three-bed semi in the western capital has surged in value by 67pc in the last five years — from €184,000 at the start of 2014 — to €308,000 today. Prices of four-bed semis hiked 61pc in the same period, from €230,000 to €370k and have now pushed through the loan to value affordability ceiling for most.
The city/suburban population is actually starting to age (headed for 40) as younger couples leave to find affordability in nearby towns. With few new homes built in the last year, and starter homes exceeding affordability levels for average income earners, last year saw the exodus increasing to towns like Tuam, Headford, Craughwell and Athenry where plenty of new properties were available at the right price. The result is that a previously jaded Tuam in particular is buzzing with new life.
“Younger buyers are getting brand new A-rated homes in these locations, which they can heat with a match, for cheaper than equivalent 1980s stock in the city,” says Colm O’Donnellan.
What also doesn’t help younger city born buyers is that the older population doesn’t like to trade down, preferring instead to stay put in their empty nests for life.
Galway City’s geography means it is hemmed in by water and the protected gaeltachts. So there’s literally nowhere for this growing city to go.
The rental market in Galway is getting particularly desperate for students. At the beginning of this month there were less than 80 rentals on offer out of 30,000 homes and a population now above 80,000. That’s just one unit for every thousand people.
The student accommodation issue has brought additional investors into the market from up and down the west coast as those with children coming of college age look to protect their scholars-to-be and cash in on Galway’s high rents at the same time - by buying and getting other paying tenants in to share with them. A two- bedroom apartment is renting at well over €1,400 per month. No comfort that dedicated student accommodation finally underway is likely to be aimed at the top end of the market.
Thankfully, the city’s accommodation problems are built on good fortune and a belting local economy. Employment in the medical devices sector, on which the city is particularly reliant is still ratcheting up.
Supply is likely to improve slightly in the coming year with around 300 new homes expected at Barna (now considered an integrated suburb) and at Knocknacarra.
Galway City Council, which had provided no new social houses in recent years, is at last active albeit buying new units rather than building its own and therefore adding to competition.
And while Brexit killed the traditional market for English buyers seeking a second home near the Corrib — Europe’s big fly fishing destination — it has lit a fire under locally born emigrants who left in the recession for Britain, thrived and then bought their own homes over there. Generally, these homes have gained well in value through the years. Their owners were planning to return at some point in time, but have had their attentions sharply put in focus by the Brexit palaver.
Banks are much more amenable to both buyers and builders in Galway City than they were a year ago. Not so long ago cash buyers made up 70pc of purchases here. Today cash purchases are down to 20pc with most buyers now availing of mortgages. A year ago builders were still suffering 14pc
interest rates, often from mezzanine financiers. With banks on board this has softened to circa 9pc, enabling them to start buying sites and a number are heading to planning this year.
The city remains a hub for the trading of rural properties up and down the western seaboard with O’Donnellan & Joyce holding seven auctions in the last year, moving hundreds of homes at a 90pc sale rate.
However Colm O’Donnellan says rent controls have continued to skew values between controlled and ‘free’ properties, sometimes to a high degree.
“If I have two identical semis side by side with one rented to tenants with long entitlements for €1,000 a month and controlled and the other is vacant, then the price difference between the two could now be as much as 20pc.” With only a slight increase in supply on the cards this year, the expectation from O’Donnellan & Joyce, is that prices will rise by another 10pc this year.