Thursday 8 December 2016

Real deal: The business of property

Philip Farrell

Published 17/04/2016 | 02:30

With a 1,200sqm footprint (not including terraces), this property for sale at the Algarve’s Quinta do Lago high-end golf resort could be used for putting practice. It offers six bedrooms, a gym, sauna, steam room, wine cellar, cinema and three-car garage and promises those essential golf views. But you’ll have to dig deep — €7,250,000 with agent Michael Roberts of Waratah Properties
With a 1,200sqm footprint (not including terraces), this property for sale at the Algarve’s Quinta do Lago high-end golf resort could be used for putting practice. It offers six bedrooms, a gym, sauna, steam room, wine cellar, cinema and three-car garage and promises those essential golf views. But you’ll have to dig deep — €7,250,000 with agent Michael Roberts of Waratah Properties

Auction vs private treaty

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A key decision for vendors when selling is whether to opt for an auction or private treaty. In the past, properties put to auction tended to be large and those for which strong demand was anticipated, such as farms, country homes, prime commercial properties and development sites. Executor sales would also fall into this bracket.

A purchaser successful at auction is contractually bound on the fall of the hammer whereas that's not the case with a private treaty sale. For this reason, most first-time buyers needing finance will purchase by private treaty because of the time it takes to finalise finance.

Over the last four years, up to 7,000 apartments and semi-detached homes have been disposed of by banks and receivers by means of large auctions. In today's market, where the investor is virtually non-existent (see piece below), it can be better to offload these properties by private treaty.

A relatively new option for the vendor is the 'online auction method', which is already gaining traction through various offerings, including Allsopireland.ie and AuctionRoom.ie. The next development will be 'online private treaty' - in fact, it already accounts for approximately 5pc of house sales in the UK.

Already there are over 20 players, including purplebricks.co.uk, emoov.co.uk and housesimple.co.uk, and while online agents are beginning to appear here, the business is at an earlier stage of development.

It's likely that we'll see a hybrid model of estate agent - at least in the short term - which will require the traditional agent to conduct the sale, but see much of the legal and financial dealings move online, making the process speedier and more efficient.

Decisions, decisions.

Portugal back on the map

The Algarve in southern Portugal has long been a favourite destination for the Irish, especially in the exclusive area known as the Golden Triangle, south of Faro Airport. The two largest developments in the area are the Vale do Lobo complex and the adjoining Denis O'Brien-owned Quinta do Lago resort. Quality golf facilities and large villas are the common denominators in each.

According to Michael Roberts of Waratah Properties who has been selling property in the area for 25 years: "During the downturn, prices dropped up to 50pc; however, there is a buoyancy back in the market, especially for the top-end luxury villas up to €10m.

"Currently there are over 50 villas alone under construction in this price bracket (up to 929sqm) in Quinta do Lago."

So who is buying? According to Roberts, they are Europeans, primarily from France, Sweden, the UK and Ireland. He has seen a renewed interest coming from Irish investors - many of whom are developers and high earners - over the last 12 months. A high percentage are cash buyers, but according to Roberts, in many cases where finance is being provided, it is no longer by the traditional banks but by new providers in this space.

With the improvement in the Irish economy over the last 24 months, combined with the weather and a 2.5-hour flight, it was only a matter of time before interest was renewed in this sector.

Investor levels hit new low

Figures released this week by Sherry FitzGerald highlight the ever-increasing housing crisis that exists in Ireland. Currently, 1.4pc of the national housing stock is on the market. In a normally functioning market, this figure would be between 3pc and 4pc.

According to Marion Finnegan, chief economist with the estate agents: "The trend suggests that for every one private investor who has bought in the year to date, two have exited the market."

With a rental market in crisis and rents increasing by 10pc a year, this highlights just how dire the situation is. This is compounded by the fact that mortgage seekers are having to comply with higher deposits and tighter lending criteria. As a result, large swathes of people will continue to rent for longer because they simply have no other option.

The current level of home ownership in Ireland stands at 69pc. One wonders what this figure will fall to over the next two years if the current barriers to entry remain in place.

If it is the Central Bank's intention to maintain its stance, then something needs to be done to attract the investor back to the residential market. In 2015, investors accounted for just 2pc of the total €5bn advanced to residential borrowers by lenders.

Commuter belt attracts big money

Kildare town continues to attract strong interest from developers following the sale of a residential development site after auction last week. The site, which has planning permission for 164 units, has an excellent location near the National Stud, adjoining the M7 interchange and the hugely successful Kildare Village shopping complex. The site was withdrawn at €4.725m, following active bidding from four parties, but I understand it was sold afterwards for in excess of €5m.

The site was purchased by a Dublin solicitor on behalf of a developer. It is intended to break ground before the end of 2016 with an expected launch date of spring 2017.

The sale of the Department of Defence-owned Magee Barracks in Kildare in recent weeks also attracted much interest from Dublin-based developers. Selling agent Will Coonan of REA Coonan wouldn't be drawn on the identity of the buyers, but said: "Much of the interest came from developers in Dublin and surrounding areas looking to get their teeth into a large residential development."

Based on today's values, prices for a three-bed semi in the area would probably be in the region of €220,000.

But the scramble to buy development land in Dublin's commuter belt indicates that the market believes supply in the capital will remain tight for the next few years.

Tweet thing

Allsops raised €50,000 for the charity ISPCC Childline in 2015. This year, alongside other campaigns, they're asking the public to tweet #allforthegood and they will donate €1 per tweet (up to a max of €5,000). Go on, it'll help answer 1,000 calls from children in need.

Sunday Independent

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