Sunday 25 February 2018

The holiday home sector is in strong recovery as demand outstrips supply

Trident Holiday Homes
Trident Holiday Homes

Paul McNeive

As thoughts turn to summer holidays, the 2016 Census report that there are 61,000 vacant holiday homes in the country prompted me to review the performance of this sector. How have investors done? What are the trends and the outlook?

The development of almost all of Ireland's modern stock of 'holiday homes' has been driven by tax breaks. The first of three 10-year schemes offering capital allowances to investors began in 1986.

The first development was Lansdowne Village, Dublin 4, a scheme of two-bed townhouses built by McInerney. To qualify for the tax breaks, developments had to have a minimum of eight houses and operate under one management structure, which is why you see so many developments of eight, nicely designed, detached houses in Irish towns.

The purchase price of the property, less the site value, could be offset against all of your income and investors in the best schemes have done well.

For example, a property in Lansdowne Village cost £46,000 in 1986 and has always let well. That capital value peaked at €600,000 in 2006, then fell back, but has since increased again to approximately €400,000.

Far less successful was the 1990's Seaside Resort Scheme, which allowed apartment buildings and individual ownership/management structures.

Even though the tax breaks were limited to rental income only, the scheme was ill-judged and led to a proliferation of badly-designed buildings which have permanently blighted some of our best seaside towns. Driven by a rush for tax shelters, the market was quickly oversupplied and many properties proved hard to let.

Some of these schemes have performed badly. Last week a property in Co. Clare, which cost €340,000 in 2006, was sold for €95,000. Nama inherited a number of schemes built around hotels, together with many individual houses, and have begun selling them as the market improves.

The market has been strengthening for three years and Jacinta Doolan, a founder of Trident Holiday Homes, told me there is now a big shortage of houses to meet demand. The company currently has 850 properties available and is managing agent for 40 schemes.

Doolan told me that while business is still 40pc below the peak, turnover is improving by 20pc per annum. There is a strong trend towards 'staycations', with 60pc of Irish holidaymakers pursuing activity-based family holidays here at home. Visitors from Germany, Holland, France and the US make up the rest of the demand.

Doolan says: "The strong dollar is having a big impact and the best call is from an American, for example, organising a golfing holiday in May, who is quoted €700 for a house for a week in Kerry. They're amazed when they realise that's the rate for the house, not per person."

Airbnb and have had an impact on the market and while Trident Holiday Homes receive bookings through these sites, some property owners list their properties directly online.

However, Doolan notes: "These are hotel models, which generate two or three short-lets per week. It suits some owners who are prepared to spend a lot of time online, and you'll be changing linen and cleaning several times a week."

The hot spots in terms of demand are Kerry, Clare and along the Wild Atlantic Way to Donegal. As the old adage goes, it's all about "location, location, location."

Roald Dahl Country

The pretty village of Great Missenden, 30 minutes north of Heathrow Airport, boasts some interesting properties and last week I visited the home of Roald Dahl and his museum.

I stayed at Missenden Abbey, a 16th century building converted to a conference centre. I was there to speak at a meeting organised by Smith & Williamson, who are what Roald Dahl would describe as 'big, friendly accountants'.

John Morris, a partner at the firm, told me their investment management funds business had been raising cash allocations since March, in case of a Brexit 'leave vote'.

The Group now sees potential long-term opportunities in equities and corporate bonds. Smith and Williamson also have a full service accountancy and investment management practice in Ireland, with 70 employees.

Indo Business

Promoted Links

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Also in Business