Head across the Irish Sea for bargain houses

Prices are at an all-time low in Ireland, but only the brave can ignore the euro's plight. Chiara Cavaglieri reports

Ireland may be watching its young graduates leave their homes behind in search of work, but many Britons are peering across the Irish Sea looking for a property bargain.

With prices at an all-time low, investors hope that the market has hit the floor and want to snap up cheap homes while they can.

Interest on the online property portal Rightmove Overseas in Irish property began to rise when the debt crisis hit the headlines, but now there are 39,000 searches for Irish property every month, making it the 11th most popular country on the site.

"Property prices in Ireland are at their lowest since 2003, so now is a great time to think about putting money into a renovation project or a newly built property before prices start to rise," says Tom Whale from Rightmove Overseas.

House prices in Ireland have been in a slump for four years and fell by 14.3 per cent in the year to September, according to the Central Statistics Office (CSO), based in Cork.

From their peak in 2007, average house prices are down by 43 per cent. Owners of flats in Dublin have been hit hardest, seeing a 4.8 per cent drop in September prices and a 59 per cent collapse from the highs seen during the Celtic Tiger years.

Prices are keen, but how do you get your hands on an Irish bargain?

"The first thing to say is that the Irish system is almost identical to the English system. Contract law is basically the same so if people have bought property in England it is really the same process," says Ronan O'Driscoll from estate agent Savills Ireland.

"What is different, however, is the extent of the collapse in value, which depending on the category of property, is down about 50 per cent but could be down by as much as 70 per cent from the peak. The official stats say prices have fallen on average by 43 per cent but that is understating the reality."

Mr O'Driscoll says that in a prime Dublin location such as Ballsbridge in the city centre, a typical two-bedroom flat in a quality development costs about €300,000 (£256,000). The peak value for this property was €700,000. In Docklands Dublin, also in the city centre, a similar flat might cost only €200,000, a 60 per cent reduction from its €500,000 peak price tag. Outside of Dublin he points to even bigger bargains to be had with three-bedroom semi-detached houses in a Midlands area such as Mullingar going for as little as €90,000 down from €250,000.

As many Irish homeowners struggle with arrears, banks will be unloading an increasing number of repossessed properties at auction. In April, Ireland held the first multiple-lot auction through auctioneers Allsop Space, and its success paved the way for two even bigger lots this year and another to follow at the end of this month. Residential lots likely to entice overseas buyers include a detached four-bedroom house in Shercock, County Cavan with a reserve price of €50,000.

"We have eight city apartments in Dublin city centre being sold with tenants and the reserve prices – one beds for €92,500 and two beds for €135,000 – are reflecting a 12 per cent rental yield," says Robert Hoban, director of Allsop Space.

Most properties in these three auctions exceeded their reserve prices, but in Allsop's September auction, a ground floor two-bed unit at Shelbourne Park in Dublin had a reserve of €130,000 and went to a buyer from England for exactly that.

Rental yields are by no means guaranteed, however, and there is a risk that rents are artificially inflated as a leftover from the boom time and may well falter at some point. There may be some cheap properties in the more rural areas and in the greater Dublin area but this is because those places were overdeveloped as people were forced to move further away when prices rocketed to unaffordable levels. Those values have now been damaged particularly badly and are attractive but these homes could prove too difficult to rent out today. There are thousands of empty flats clustered around the outer M50 motorway, but in the city centre, where tenants want to live, there is far greater rental potential.

"If people from the UK are considering investing in the Irish market they must be careful where they choose to buy," says Mr O'Driscoll. "Keep in mind the general neighbourhood, and transport links are critical. The nearer to the city centre the better because they don't have the oversupply."

Whether you pick a hot spot or not, property investment is still all about timing. International buyers with an interest in Ireland may be won over by the idea of buying an idyllic seaside property in Cork or a trendy new-build in Dublin on the cheap but there are some significant risks.

First of all, investing in property is an expensive game with stamp duty, surveys and legal fees to factor in so it isn't to be entered into lightly. And because property is so illiquid it should be treated as a long-term investment. The market could be in the doldrums for some time and Irish banks are in no position to lend. Cash buyers looking for a quick sale may find they have no one able to buy.

Above all, British buyers must be aware of the danger of investing in euros. Not only do they have to consider the exchange rate when buying and converting any rental income but also, because if the Irish bail out of the euro and their currency devalues, it could be devastating for anyone holding euro-based investments.

"Investing now presents real risks and is only for the very brave," says Simon Webster from independent financial adviser (IFA) Facts & Figures. "Anyone with any doubt should talk to someone who bought in Spain five years ago and now cannot sell for love nor money – even at a huge discount. With the increasing risk of a complete or partial unwinding of the euro (including Ireland's possible exit and subsequent devaluation of its own currency) I would look for property bargains outside the eurozone."

Expert View

Tom Whale, Rightmove Overseas

"The interest in Irish property from the UK has increased dramatically over the past 12 months, as UK buyers realise that there is a surplus of properties at low prices all over Ireland. UK buyers and investors are purchasing with future price increases in mind, as well as looking to rent out the property to short-term holidaymakers and long-term local residents. With local Irish buyers finding it increasingly difficult to get on to the property ladder, rental yields can be very attractive and there is the potential for a good return on your initial investment."