Demand may be
in process of peaking and is unlikely to decline significantly in next
outlook suggests house price inflation is likely to average 7 per cent
Surge in housing
wealth in Ireland has been dramatic with an estimated net worth of homeowners
increasing by about €30 billion in 2004; more than four times the
rise in GNP.
likely to be a key driver of Irish economic outlook in coming years.
Holiday Homes - Ireland has recently witnessed an upsurge in the number
of investors buying holiday homes in some of the countryís most scenic
areas. With stars like Jeremy Irons and Daniel Day-Lewis popping
up in the quaint villages of West Cork, prices in many of these areas are
at a premium. Kerry and West Cork, in particular, and the south coast in
general, known as the Irish Riviera are attracting a steady flow of Britons
and Americanís. The majority of the British buyers are investing
in a property to use as a holiday home with the intention of retiring to
it in the future.
The south coast
of Ireland tends to have a milder climate than the rest of Ireland, experiencing
warm summers and milder winters brought in by the Gulf Stream current that
flows past its shoreline. The climate, coupled with the breath-taking
scenery and strong sense of heritage and culture, has made Cork an attractive
location not only for Britons searching for a rural retirement idyll but
also for the French and Dutch who have long been attracted to county.
The Irish too,
taking advantage of improved roads, domestic flights offered by Aer Aran,
and generous tax incentives are beginning to search closer to home for
holiday home investments. With prices as low as €110.000 for
a two bed roomed chalet on Dingle Peninsula, investing in a holiday home
in Ireland, need not break the bank. Generally, chalet style homes
will be cheaper to buy than stand alone properties on their own land.
want to buy a traditional style home with views of the sea or unspoilt
countryside. A typical three-bedroom property with sea views could
cost anything upwards of €480,000, while a property with spectacular
country views could have a price tag in excess of €280,000. The difficulty
and one of the factors contributing to the high property prices in Irelandís
most scenic locations, is the shortage of properties that come on the market.
It seems that when people buy in Irelandís most scenic locations, they
donít want to move!
of the people buying holiday homes in Ireland having roots in the country,
they tend not to get too involved in renting out the property.
For those who want to invest in a holiday home to let when not in use,
the letting potential of properties located in areas such as West Cork,
Kerry, Connemara or quaint port towns such as Killibegs, is good.
A four bed roomed house with good sea views could expect to take in €1000
per week in the summer season.
buyers find holiday homes too small and see extending the property or building
a new home as the best option. It is worth bearing in mind the difficulties
that may be encountered taking this route. Strict planning regulations
make it almost impossible for foreign investors or indeed Irish nationals
from outside the county, to build a property on purchased land. Planning
regulations favour locals building new homes in the area. It may be more
difficult too for foreign buyers to obtain planning permission to significantly
alter or renovate an existing property, though once a property is owned,
it is easier to secure planning.
demand for second homes remaining steady, there is no sign of prices slowing
down. Last year property prices in West Cork rose between 8-9%. The
situation is similar for many of the other tourist hotspots. Rental incomes
aside, anybody making a smart investment in some of Ireland most desirable
scenic locations can expect to see significant return on investment over
the coming years.
Generally, the east coast, including Dublin, and the major cities
such as Galway and Cork tend to be hugely overpriced. Avoiding these
areas and investing in Irelandís midland counties where prices are more
realistic is a safer option but no necessarily the most profitable.
If the worst-case scenario happens and the property market in Ireland plummets,
those investing in price-inflated properties will suffer most. Those
who invest in rural Irelandís cheaper properties will escape largely unscathed.
Not everybody, however, looks at property purely for its investment potential.
For those making a complete relocation and buying a permanent home, swings
in the market are irrelevant. Many come to Ireland to live a quality
life in a quality environment and never intend to sell. These are
the people who can be choosy about where and what they buy since they are
likely to sit out any crash in the market. For many investors too, rural
Ireland and the Ďhunting, shooting, fishingí lifestyle that it conjures
up in the imagination is the preferred option. Although prices in
country areas have increased over time, they still lag behind the inflated
city prices and it is possible to find a ready to move into home in Ireland
for as little as €70,000.
For those who
have the inclination and resources to renovate, the skeletons of former
Irish cottages can be picked up throughout the midlands for as little as
budget investor, however, even in rural Ireland there are areas to avoid.
Trying to buy property in Irelandís established tourist hotspots puts you
in competition with the wealthy elite who has the cash to lay claim to
some of Irelandís most beautiful landscapes. Killarney in Co Kerry,
Killibegs in Donegal, Kinsale in Cork and Connemara in Galway
are likely to break the bank of any small scale investor. However,
the Irish tourist board are making considerable efforts to promote new
kinds of tourism in Irelands midland counties. In particularly counties
situated along the river Shannon, such as Roscommon and Leitrim.
It is still
possible to pick up properties in these counties at an absolute steal by
todayís standards. The properties are likely also to have excellent
rental potential from the tourist industry and are well suited for letting
to fishing enthusiasts because of the many lakes and wetlands that surround
them. Supply a boat with your property and you can very much guarantee
being booked out for the summer. Renting a three bed-roomed property in
Roscommon, you might expect to earn somewhere between €450 and €700
per week in peak season.
properties equally as cheap in some parts of County Sligo, eastern Mayo
and Tipperary. As a rule, the further the property from the sea, the cheaper
the price tag! So even in counties with coast lines, the further
you move away from the coastline, the cheaper you can expect the properties
affordable of all the counties is County Tipperary. The largest
of the inland counties, Tipperary is lacking the key attractions that make
for good tourism, lakes, rivers, and mountains. It does have itís
own charm and is certainly the place to look if you are seeking Ďthe peace
and tranquillity of rural Irelandí. Itís not over-run by tourists
and it still has the air of a well-guarded secret. In Tipperary itís not
unheard of to pick up a property for €25,000.
in Dublin Ė Whatís up for Grabs - On the back of attractive tax
breaks introduced in the 1980ís to encourage the regeneration of Dublinís
run-down city areas, apartment complexes began to spring up in every nook
and corner of the city. Prior to that, apartment living was virtually
unheard of in Ireland making up only 13% of all sales in 1980. Now,
apartments in Dublin account for 1 in 4 of all new homes built and make
up half of all sales in Dublin. And the supply continues to increase dramatically
every year. In 2004, 26,000 houses and apartments were built in Dublin.
This represents an increase of more than 140% on figures from 1994. A low
interest rate environment has kept demand for new housing in Ireland strong.
people jumping onto the property ladder prices have increased in line with
demand. A two bed roomed apartment in Dublinís more exclusive,
but not necessarily central, developments can go of up to €450,000.
Similarly, a one-bed roomed apartment located within 2 miles of the city
centre can go for €400.000.
arrival, apartments have always been the favoured option with investors
in Dublin. Being low maintenance, they are a relatively hassle
free investments. Also their typically central locations make them
attractive to the young Dublin workforce looking for a centrally located
property to rent. On the downside, the oversupply of apartments in Dublin,
coupled with the favourable interest environment pushing more people onto
the property ladder, has meant that rental yields from properties in Ireland
have fallen from boom time figures to under 3%. In fact, rental yields
have decreased by 19% since their peak in 2002. In many ways the
fall in rents is not too surprising since rental prices rose phenomenally
prior to 2002. This year a property that might have taken in a rent
of €1000 per month last year is now bringing in €800.
big question for investors a property purchase in Ireland is, will the
rental income cover the cost of the mortgage repayments? In the
current climate, probably not but choosing whether or not to invest in
the buy-to-let property market is a decision that will depend on how long
the investor is prepared to wait for a return on investment. While
it was possible for investors to make a property pay quickly in the pre-2002
environment, now investors are forced to rely on capital appreciation to
give the returns they expect.
the rents donít entirely cover the costs of the property, those prepared
to sit on their investments for up to ten years will still receive an excellent
return. With capital appreciation on Irish properties at around
13% last year, investors can expect a property to almost double its value
in the space of 5 years. Even if as suggested house inflation is
estimated at 7% , the capital appreciation on the cumulative price over
a ten year period makes it a worthwhile buy. Significantly, 32% of
all houses built in the greater Dublin area in the first half of 2004 were
sold to investors, indicating that despite a decrease in rents, investment
interest remains strong. This suggests that investors capital appreciation
rather than rental yields is motivating most buy-to-let investors.
in the city centre or within a short commute distance are expensive,
there are still areas of the city that offer good value, particularly around
Drumcondra and old Finglas on Dublinís northside and Ballinteer and Cabinteely
on the southside. The key to finding cheap properties that will still
rent out at a rate that will cover the investment costs is research, local
knowledge and networking. Buy-to-let properties in the range of €190,000
to €300,000 are the safest option for those who want rents to cover
the cost of mortgage repayments.
It is worth
noting also that despite apartments being the first choice with many buy-to-let
investors, houses offer more potential for income since they can be divided
in two or more rental units. Houses will also appreciate at a higher
rate than apartments. House prices have increased on average by 86% between
1999 and 2004. In comparison, apartments have increased in price
by 68% over the same time period.
Process - Most new builds offer very little if any scope for negotiation
on the asking price of the property. When buying a second hand
property, there is generally some room for negotiation, though because
the current market is so active, the chances of snapping up a property
at below the asking price is slim.
setting prices 0.5 to 1.5% higher than the desired purchase price, haggling
is a luxury that many buyers cannot afford. More often than not,
in the current climate, houses will achieve the asking price and sometimes
a few thousand more than the asking price.
an offer, be sure that the terms of the offer are clearly understood by
all parties. Some offers may be made subject to agreements such as
additional work being carried out or furnishing being included in the sale.
Not being clear about the terms of the offer may result in additional expense
along the way. An offer will usually be subject to a contract and a survey.
If the survey reveals problems that you were not made aware you are free
to revise or withdraw your offer. There is no binding obligation on either
side until contracts are exchanged.
be asked to pay a booking deposit at this stage in the region of 2-3% of
the property price. This is an indication that you are serious and
is refundable in full if the sale does not proceed to exchange of contracts
for any reason. Unfortunately, even at this stage the vendors are not obliged
to sell to you at the agreed or any price. Despite placing a booking deposit,
the vendors can still accept another offer or increase the price at will.
This is known as gazumping and is a common practice in a buoyant property
market. At this point, you should instruct your solicitor to check the
title to the property, any planning issues that affect the property and
other details that may be relevant. At this point a mortgage lender will
insist on a survey, usually by one of their approved surveyors. This survey,
generally costs €100 to €150 including VAT and is solely
for benefit of the lending agency.
It is important
to realise that this survey is solely for the purpose of assuring the lender
that the property is adequate security for the loan. It should not
be relied on as an assurance that it is either worth what you are paying
for it or that it is free of significant defects. This is a very superficial
survey and buyers would be well advised, particularly with older properties,
to commission a more detailed survey. This should point out any significant
defects in the property and provide an estimate of what it might cost to
of a satisfactory valuation report from the surveyor, the lending agency
will write to buyer with a loan offer detailing how much they are prepared
to lend on the property, over what term, the interest rate, the repayment
terms and so on. Once the document are signed and returned to the lender
along with signed direct debit mandate, evidence of a Buildings Insurance
policy covering the property and evidence of Life Insurance covering the
borrower, a date will be arranged with your a chosen solicitor to forward
to him/her a cheque for the amount borrowed (the advance).
solicitor will agree a date with the buyer and the vendor's solicitor for
exchanging contracts. This will usually be done at the solicitor's office.
At this stage, the solicitor should be entirely satisfied with the terms
of the contract, including fairness of the contract, outstanding planning
issues that might affect the property, the vendors title to the property
and so on.
will generally set a date with the buyer and the vendorís solicitor, upon
which to complete the sale. At this point, the purchaser will also
be required to pay the balance of the deposit, usually 10% of the purchase
price, less any booking deposit that have already paid. Once contracts
are exchanged, the agreement is binding on both parties and, if either
party fails to complete the transaction, they can be held legally liable.
Failure of the buyer to complete at this stage will result in the loss
of the deposit paid. If the vendor fails to complete, the deposit will
be returned and the buyers is entitled to sue the vendor for any losses
On the completion
date the appointed solicitor should have received the advance from the
lending agency and the keys to the property. The balance of the purchase
price will be paid. The solicitor will hand over the full purchase price
to the vendor's solicitor and the transaction is complete!
Once a sale
is completed, the purchaser's deeds, showing the new ownership details
and mortgage details, if relevant, must be registered with either the Registry
of Deeds or the Land Registry. Before this can happen, the deeds must
be presented to the Revenue Commissioners who will determine how much,
if any, stamp duty is due. Stamp duty is due when deeds are presented to
the Revenue Commissioners after the closing of a sale. However, the solicitor
will calculate how much stamp duty is due and request this from the purchaser
prior to the closing of the sale. Stamp duty is calculated as a percentage
of the purchase price, between 3 and 9% depending on the value of the property.
Some buyers are exempt from stamp duty on transactions up to a certain
value. The amount is paid to the Revenue Commissioners who place a stamp
on the deeds. Without this stamp, the deeds cannot be registered.
is a property advisor and journalist, living and working in Ireland.
She offers email consultation to novice overseas property buyers and as
well as editing
be contacted on email@example.com