November 12, 2012

Irish homes draw buyers after Europe's worst crash

Those with access to cash will find a lot of opportunities, say experts, urging banks to encourage a recovery by stepping up mortgage lending.

By DARA DOYLE/Bloomberg News

DUBLIN — In Dublin, the epicenter of Western Europe's worst housing-market crash, signs of life are emerging for those with access to cash.

click image to enlarge

Residential apartments in the Docklands area of Dublin in 2011. For people with access to cash, signs of life in the real estate market are emerging in the epicenter of Western Europe’s worst housing-market crash.

Aidan Crawley/Bloomberg News

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A row of cottages in Dublin in 2011. “I’m not calling any massive recovery, but people are going to look back and see a lot of missed opportunities in Ireland if they had the cash,” says the head of one property broker.

Aidan Crawley/Bloomberg News

A five-bedroom, Victorian-era home near the center of Dublin was sold last month for 2.05 million euros ($2.6 million), 17 percent more than the reserve price. At the other end of the market, apartments are being snapped up at auction for as little as 50,000 euros ($63,580) in cash. Even prices for homes requiring mortgages across the country rose for a third straight month in September, the Central Statistics Office said.

"It's the first time I've bought in Ireland," said Neil Cotter, 47, an accountant based in Gibraltar who last month bought three Dublin apartments at a sale of distressed real estate. "I just had a look at all the markets in Europe and it seemed the most attractive."

Since the end of the Celtic Tiger boom that made Ireland the fastest-growing economy in the euro region in the decade ending in 2007, property prices have fallen by 50 percent, ruining the country's banks and forcing the government to follow Greece and seek an international bailout. While bankers and analysts are split on calling the bottom, they agree any further recovery depends on a revival in mortgage lending, which the Irish Banking Federation says dropped 95 percent from the peak.

"I'm not calling any massive recovery, but people are going to look back and see a lot of missed opportunities in Ireland if they had the cash," said Keith Lowe, CEO of Dublin-based property broker Douglas Newman Good. "Banks must understand that in order to have a proper recovery, they must lend."

IRISH TURNAROUND IN SIGHT?

Mortgage lending in the first half of this year dropped to 950 million euros ($1.2 billion) from 18.5 billion euros ($23.5 billion) in the same period in 2006, the Irish Banking Federation said. Cash now accounts for half of all sales as banks balk at taking on more mortgage debt, Goodbody Stockbrokers in Dublin estimates.

Cotter said he paid 100,000 euros to 200,000 euros ($127,000 to $254,000) for each of the one- and two-bedroom apartments at the auction and is renting them out. He expects a yield, or rental income as a proportion of capital value, of 10 percent in Dublin.

Property prices in the city rose 2.6 percent in September.

"It's for my pension frankly," Cotter said Oct. 9, following the sale. "I've been holding off on investing in property for five or six years, and Ireland went into that range that offered a very attractive proposition."

There are cheaper properties available just outside the city center. A two-bedroom apartment in a west Dublin suburb was sold last month by auctioneer Allsop Space for 50,000 euros, or $63,580.

Irish home prices quadrupled in the decade through 2006. Building surged, helping to transform Ireland into the fastest-growing economy in the euro region. The boom ground to a halt in 2008, in the wake of Lehman Brothers Holdings' collapse and the subsequent credit drought.

In Dublin, house prices are down 55 percent from their peak in 2007, while apartment prices have fallen 63 percent, the country's central statistics office said last month. Outside the capital, prices are down 46 percent.

Now, a turn may be in sight. Last month, prices across the country climbed 0.9 percent, accelerating from 0.5 percent in August and 0.2 percent in July, according to the central statistics office. Bank of Ireland Plc saw "a noted pickup" in mortgage demand in September and October, Chief Executive Officer Richie Boucher told lawmakers Nov. 1. The bank, Ireland's largest by assets, accounts for 40 percent of new mortgage loans.

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