Chapter 1: What is the main topic discussed in this episode?
Breakfast Business with Enterprise Ireland on Newstalk.
Now, you're welcome back to Breakfast Business with me, Emmet Oliver. It's great to have you along on this Monday morning. Now, the average property in the existing homes market has been sold once every 50 years. Extraordinary number, really.
That's according to a new report from the property portal My Home in association with Bank of Ireland, which found that the rate at which existing homeowners with mortgages move is now less than than half of the UK level. And Conal McQuilla, the chief economist of Bank of Ireland, is here in studio to talk me through what's going on. Conal, you're first of all very welcome.
We talk about an opaque process. Can you just give us some idea what you mean by that?
First of all, there's a recent survey from the Competition and Consumer Protection Commission.
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Chapter 2: What does the report say about the average property sale frequency?
In that survey, only 16% of homebuyers felt that the market was transparent. I think also one of the key things in our report today is that, like in the UK where the asking price is the asking price, and typically transactions are settled at the asking price, What we've seen in Ireland increasingly is this premium over the asking. So about 40% of properties sold about 10% over the asking price.
About 1 in 6, 1 in 7 sold over 20% over the asking price. So that's not a good place to be. If you're a home buyer, you're kind of guessing, you see the asking price, you're sort of saying to yourself, will it finally settle 10% over that number? So if it's, say, listed for 400,000, is it going to be 450,000, maybe 500,000?
So that shows that asking prices are a poor guide to affordability for homebuyers. It adds to the time and effort they have to spend buying a home. And that's what we mean by this opaqueness. And it's probably hurting liquidity. It's a very difficult housing market.
So would a way to correct that be to have some kind of public register or flush that information out and make it transparent? Would that help things?
Well, we already have the property price register, so that was a very welcome improvement in terms of transparency for the housing market. You don't need to rely on anyone to tell you what properties are selling for in the local area. You can check it yourself.
So I think what we're trying to argue in this report is that we have these new online bidding platforms where the entire bidding process is online. You log in, you can see the entire bidding history. If there's a new bid, you're notified of that immediately. So it takes a lot of the uncertainty out of the process.
And as well as that, I think it guards against the risks that people just waste their time looking at properties they can't ultimately afford. I think where we need to eventually get to with these online bidding platforms, which are, I think, going to eventually take over, will be increasingly used and be the way that properties are sold.
Ideally, if you see a property, you think, will you be able to afford it or not?
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Chapter 3: Why is the home buying process considered opaque in Ireland?
You can see those bids pretty quickly, so it guards against wasting your time.
So why do you think we have this market the way it is? In other words, who's blocking or putting obstacles in the way of greater transparency? Or is it just nobody is bothered to do it? Or what's the hold up in getting to the system that you'd like to see?
Look, there's a range of issues. There's conveyancing, there's the length of the sales process. One of the sort of issues in the Irish housing market is the lack of chains. So if you're in the UK, you might see four or five transactions settle on the one day. And what that means crucially is that you don't need to sell your own home before you buy another.
And I think that's one of the really key issues, which is potentially holding back liquidity in the Irish housing market. Now, when it comes to asking prices being set low relative to the final transaction price, that's just a practice in the industry. I'm sure there's estate agents who feel they're doing the best for their clients. That's the best way to achieve the best price. I think that...
perceived advantage of setting a low price is probably illusory.
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Chapter 4: How do asking prices in Ireland compare to actual sale prices?
And again, if we bring in more transparency and people can see the bids, I think what they'll find is that actually, wherever you set the asking price, the market price won't be affected. So there really isn't that much to be gained.
I suppose to help our listeners, you're essentially saying that a lot of buyers are tied up in bidding wars that are not going to pay off. They're wasting their time. They're in a cul-de-sac because they can't see fully what's going on. So they may waste valuable time by getting into a race to buy a property, they're not going to get it ultimately.
When they could be looking at other ones, right, they're displacing that time.
Yeah, time has been wasted. I think it's probably putting people off from the market. There's other difficulties as well. I mean, I think when one in six, one in seven properties has been sold 20% over the original asking price, that's not a good place to be.
Any well-functioning market, as in the UK and the US, where the asking price is the asking price, that's where we want to be and hopefully we can get there.
Is another reason that mightn't show up in the data but could be present the idea that a lot of people put properties on the market and you do hear people advising people to say, you know, just sit on the property, sell it, take as long as you want until you get the price. So people are, there's less drivers to get them to sell.
They're just happy to sit there and wait six months if it needs to be until the right price walks in the door. So, you know, you get sometimes you get a fire sale. We have the opposite of that because we have... The price is going up so, you know, accelerated fashion that people just say, if I take six months, fine, I mean, I could get an extra 50 grand.
I think there's a danger trying to be too clever about this entire process. There's plenty of people who want to buy houses out there at the moment. I think people should set the asking price as the asking price where they think it's going to sell. But again, this is an issue which has gotten worse over the past couple of years.
I've seen the number of transactions in the existing homes market actually contract again. this year. So existing home movers are very reluctant to move. It's an issue for downsizing, for example. So again, Bank of Ireland recently launched a product around facilitating downsizing. We have obviously a lack of housing. There's a lot of empty bedrooms out there.
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Chapter 5: What role does the property price register play in market transparency?
It is. So again, if you're in an ordinary sales process, you're worried about, is there a bid come in? Has it not? You can be confident in these platforms. You can see it in real time. You can improve your bid at any time yourself. You can see any new bids that come in immediately and be notified of that. So it brings extra transparency and clarity for homebuyers.
Let me and you will make a date and see that they have it from a year from now. We'll do the same interview again. But you put the idea out. That's all you can do, right?
Chapter 6: How can online bidding platforms improve the home buying experience?
I think it's somewhere going to end up inevitably. We should probably get ahead of that to help improve the functioning of the housing market, which is not perhaps where it should be.
Great. Listen, thank you very much, Conor McQuillan, as Chief Economist with Bank of Ireland. Thank you for walking us through that report, which is done in conjunction as well with my home.