It always surprises me when I hear investors sizing up the Irish market, particularly those moderate landlords with a few cash-flow residential investments that were lucky to survive the last few years. Many are, within the last 12 months, starting to ask the question “Is now the right time to get back into the property game?” Naturally, it depends on the target area, however, if the target area is Dublin city centre then the answer must surely be no. Now is not the right time to be ‘getting back’ into that market. In fact, 2010 or early 2011 was the right time – arguably 2009 if you had the cash and the stomach for it.Investors coming into the current Dublin market will themselves facing high (and rising) buy-in costs, an increasingly competitive marketplace and worryingly few real bargains. The bulk of the opportunities lie not necessarily with the bank or receiver stock, but rather with the distressed sellers who are still in control of their properties legally – albeit, not in practice. In practice, these sellers require the consent of their lender before accepting any offers or reaching any agreement to sell. This point in time actually represents a unique opportunity for not just the buyer, but for the seller and the lender. The opportunity for the distressed seller is to off-load the property sooner rather than later, therefore incurring lower fees and charges, not to mention lower stress levels. The opportunity for the bank is that it is much more time and cost efficient to agree to a discounted sale rather than incur the additional risks that a protracted ligation would attract. The ultimate opportunity is afforded to the buyer who has the chance to purchase the property at a significantly reduced price. This is the Holy Grail for bargain-hunters but is unfortunately much less common now than it was back circa 2010.
For lower value investors, this will less likely to be achieved in the capital so they will need to look elsewhere. With many rural towns finding their local property market and the rental market depressed, regional cities will start to look attractive. We know that Galway city is well underway in terms of recovery and Cork is, in recent months, showing some positive signs, speculative investors may well turn their attention to the stagnant markets in cities like Limerick and Waterford.
Waterford properties feature quite heavily in the upcoming Allsop Space auction – whose line-up, incidentally, for next month’s auction does little to further their recent efforts to shed the ‘’distressed property sales’ tag. Ten of the 124 properties going under the hammer are located in Waterford city or county. Of the ten, nine are residential units, mainly houses. The reason for so many Waterford properties is, in my opinion, less of an indictment of the local market and more indicative of sellers who are either unwilling or unable to hold back sales in the hope of market recovery.
The pricing of these properties appears to be quite erratic when compared with similar properties appearing on the register, with some houses having a stated minimum reserve of significantly higher than recent sales – like the house on the grounds of Faithlegg Hotel and Golf Club – and some are significantly lower, as is typical of the Allsop Space offering.
According to the national property price register, 2013 has been the slowest year since before 2010 (i.e. pre-dating the register’s data) for properties sales in Waterford, with the volume of recorded sales down on recent years. Over the past three years, 2010 – 2012, there have been almost 1,500 transactions, averaging approximately 480 transactions per year; however the number of recorded transactions to date for 2013 is a mere 42.
What is particularly unusual is that property in rural towns around the county, like Dunmore East or Dungarvan, appear to be out-performing property in the capital in terms of holding value.
It will be interesting to see how these properties perform under the hammer at The Shelbourne Hotel on May 15. I would certainly be surprised if each one found a seller and, isolating the Waterford properties only, I would expect these to exceed their minimum reserve prices by much less than the overall average, which is usually approximately 30 percent.
There is a type of investor who will find the Waterford market appealing and this will typically be a locally-based business owner or a speculative investor who is willing to take a long term view.
There is no doubt that the low buy-in costs and long term capital growth potential will attract starter investors or those looking for re-enter the investment market using cash resources only. What remains to be seen is whether the moderate rental market will be sufficient as a reward for those investors willing to take the risk.