There has been a marked increase in pre-63 properties in the Dublin market of late. We have seen a flood of multi-tenanted, usually period, houses introduced to the open market since February 2012. Interestingly, there is a corresponding increase in demand for these properties. Cash buyers, mainly investors but with a surprising number of first-time buyers, are actively seeking out multi-unit, residential properties and the majority of these tend to be pre-63 properties. This term applies simply to large houses that were converted into individual units, or bedsits, without planning permission prior to the enactment of the 1963 Planning Act. Until now, these properties have been exempt from certain building regulations, however, from February 2013, they will need to show compliance with current and future regulations. This is the single-most reason why so many of these properties are being off-loaded by professional investors, and particularly the banks and receivers, at the moment. In practical terms, would-be buyers must be aware of the new standards, which will be the minimum legislative standard going forward, and ensure that any property they buy is compliant or capable of being brought up to a condition of compliance prior to February 2013.These properties are sporting exceptionally low guide prices and tend to sale-agree within weeks, or even days, of hitting the market. Unfortunately for bargain-hunters, it is difficult to tell the difference between a quality investment and a dud simply by surfing on-line sales websites or to assess the so-called ‘market value’ simply by calculating the yields. A 17 per cent yield on a property asking €150,000 will shorten very quickly if a minimum renovation cost of €100,000 is added to the purchase costs.
The off-market activity for these properties has also spiked, as most pre-63s form part of an investors’ larger portfolio. What tends to happen is that investors offer one or possibly two properties initially, this serves both to test the market and avoids unnecessarily flooding local areas. As the guide prices are strategically low, there are, inevitably, unsuccessful under-bidders who will be offered a second bite of the cherry, so to speak, and will be introduced to other similar properties from the same portfolio, prior to these new properties hitting the open market.
Most experienced buyers will know that when something appears too good to be true, it most likely is. For this reason, investors will need to do their research. The yield may be advertised as 17 per cent but how realistic is this? There are some genuine pre-63 properties available, both on and off-market at the moment. The best advice for buyers is to educate themselves on the forthcoming legislative changes so that when they view these properties, they can judge how capable the properties are of being brought up to the new minimum standards and what the likely costs of same will be. If the purchase price together with renovation costs in relation to the income results in a likely yield lower than 10 per cent, buyers are advised to keep searching…
Carol Tallon is author of the Irish Property Buyers Handbook 2012/2013 and MD of Buyers Broker Ltd, Tel: +353 (0) 1 4428 035 Email: firstname.lastname@example.org