Previously published in the Irish Independent, 27 May 2011.
Since April, the market has spoken and what it tells us is that investors, both Irish and international are back in force, armed with cash and they want to buy residential and commercial investments in Ireland.
Following on from the first major impaired assets auction in April, where almost €15 million worth of property sold in five hours, Allsops Space the agency with carriage of sale will be hoping to replicate their earlier success on 7 2011 July.
Bank of Scotland (Ireland) and other non-NAMA banks will offer a second round of distressed properties to bidders, with approximately 120 lots expected to come under the hammer. The catalogue will be available from next week and it is anticipated that there will be a greater mix of commercial investments, previously 12 per cent, and locations will be kept within the urban centres and surrounds.
Despite uncertainty in the market, rents in the capital stabilised in 2010 and rose slightly in the first few months of 2011. The stock of available rental properties hit a high of almost 24,000 in 2009 but is now in the region of 17,000.
With yields averaging 4 to 5 per cent, depending upon the area, investors need to buy well. A cheap property can be bought cheaply in any market, the key for investors is to buy quality properties below market value. Yields of 5 to 8 per cent are achievable outside prime areas and investors should not accept less than this until the market as a whole stabilises.
Mortgage lending has fallen through the floor this year, with recorded drops of 53 per cent since last year. The total value of new mortgage lending in the first quarter of was €577 million. This should not affect the fire sale auction market as, anecdotally within the industry, cash buyers have been as prevalent in the market as mortgaged buyers for the first half of the year. This trend is likely to continue through 2011 and early 2012. With personal savings in Ireland estimated at €90 billion, this is realistic.
However, investors looking to get involved with larger projects or multi-unit purchases might find the auction scenario too competitive and might be assured of a better deal outside of such a public forum. Cash investors will find that their key strengths, quick decision-making and ready access to funds, will be rewarded off-market. While NAMA may have an obligation to dispose of property through a public process, non-NAMA banks still have a huge stock of completed properties that are ready to go and in need of buyers.
It appears that the investment market has found its floor without much need for government assistance or incentives. The stamp duty initiative was the only positive measure for residential investors. While accurate data reporting remains an issue in assessing value (the new CSO Index merely collects information from the eight main lenders in the market), investors are regaining their position in the market.
This drive may be likened to greed but that is not a bad thing for the Irish market. Greed may have played a huge part in the demise of our much-grieved Celtic Tiger, but it appears that this very greed will be the stimulus the market needs to move forward.
~ Carol Tallon,
Author of the recently published Irish Property Buyers Handbook 2011 and MD of Buyers Broker Ltd.