Monday 19 February 2018

Home truths: It's time to don that investor hat

The Luas line near Dundrum
The Luas line near Dundrum
Mark Keenan

Mark Keenan

For generations, the capital value performance of a private home has not mattered a jot to most Irish homeowners. Our national habit has been to buy a house based largely on where we want to live; perhaps trade up once and then spend the rest of our lives happily entrenched in that property. In rural parts, the 'one home' habit has been even more enduring, with most building their own abode following marriage and living there until departure in a box.

But the property crash, the legalisation of divorce in Ireland and increasingly unpredictable lifetime employment prospects have combined to forcibly break that habit. For the first time, you can't be certain you'll be able to stay in that family dwelling for life.

Thus far, thousands have been forced to sell their main family home either through repossession, bank-nudged sales, marital break-up, unexpected unemployment or through voluntary decisions based on belt tightening and a realignment of lifestyle. Enforced trade-downs have abounded.

Today, as the banks belatedly move into their endgames to clear up the bad loans on their books, there are scores of repossessions or bank-pushed properties on the market or coming to market. However, those being forced to sell today have at least had the advantage of many years of price growth to reduce their negative equity or to take them into a situation of higher equity.

How well their homes sell will matter hugely to these people today. Suddenly, capital value performance over years has assumed a vital importance. How their home's value has performed relative to the rest of the market will determine whether they can actually trade down and buy a smaller property or not. Forgoing that, it will determine whether they emerge from the wreckage with some money in their pockets.

Decisions about where and what to buy made back in 2002 and 2005 are coming home to roost.

Economic, social and employment change mean that today's homebuyer must be increasingly investment-aware when buying a family home because, unlike previous generations, they may have to call on that property's capital value performance going forward.

Successful investors get yields right - the rental income potential versus the investment. Good rental properties are located near universities, hospitals and centres of progressing industry. They have reliable and efficient transport links attached. Then comes a nose for sourcing a property that can gain capital value ahead of the posse or hold it better in a downturn.

Those who gain best on capital values have a nose for trends. They can identify locations which are likely to improve going forward.

Those who bought in 2002 in Dublin's Dundrum, for example, will have benefited from a 20pc to 30pc boost to their home's value - ahead of other similar locations - based on the arrival and success of the Luas. Those who bought in and around the tech hub, which has grown up around Dublin's south docks, will have found themselves in possession of a property bought for buttons when an area was jaded, but where values similarly surged ahead based on the arrival of Google, Facebook et al.

So what should family home buyers be looking for with their investor hat on?

In association with How Much Is Your House Worth? 2017 - the Irish Independent and's universal home-value survey (now available online) - we asked a panel of experts where today's investment 'hotspots' are to be found - where property values and rents are likely to surge ahead of the posse in the years to come.

Most pinpointed homes in Dublin's north inner city close to the proposed new Luas stops and the fast expanding Grangegorman DIT. Phibsborough, Cabra and Stoneybatter. They highlighted apartments in the IFSC for relative capital value increases and mentioned traditional upper-end inner suburbs like Ranelagh and Dartry at the high end. They cited houses in maturing areas where amenities are improving and where houses have tended to be cheap historically - like Tallaght and maturer parts of Clondalkin. Commuter towns in Kildare on improved transport links were mentioned.

Elsewhere, Knocknacarra in Galway City was mentioned, based on shortage and high demand from those who grew up there. In Cork City, Blackrock, Sunday's Well and Model Farm Road were name-checked as having better growth prospects. Growing satellite towns like Mallow and Tuam were suggested.

In Limerick City, Raheen and the Ennis Road were cited as investor hotspots for the year ahead.

Worth considering (along with schools and parks), because in these uncertain times, investment smarts applied to a family home purchase decision today could help bail you out tomorrow.

Indo Property

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