March 3, 2015
Dear Overseas Property Alert Reader,
The property market in Ireland has been hitting the headlines in a big way over the past 12 months. After spending years spinning downward into what looked like a black hole it might never emerge from, the market bounced back—in dramatic fashion.
With around half the value of the average home wiped out—and after years of distressed property auctions at which homes were sold off at 80% and even 90% discounts—things suddenly changed. A bottom was reached, and price declines slammed into reverse.
In December of 2014, Knight Frank’s global property index revealed that Ireland had beaten Turkey, Dubai, and the U.K. and had the world’s fastest-growing real estate prices. The little green island’s annual growth rate hit 15% in the 12 months ending September 2014.
At a glance, this looks like the same old pattern of boom to bust we’ve seen in the Irish market time and again. But there’s more to it this time.
Six Reasons This Irish Boom Is Not About To Bust Like The Last One
When you look a little closer, there are some key differences between the last, ultimately doomed property boom and what we’re seeing in Ireland today. Those differences leave the door wide open for overseas investors to step in and make a killing.
Speculation Vs. Buy-To-Live: What fueled much of the property bubble that culminated in the crash of 2008 was property speculation among Irish homeowners. Prices had been rising for so long and at such a speed, that a second home looked like a fantastic investment to a lot of people. Everyone and their mother became a landlord, renting out their second property and using the rent to pay off their mortgage.
With plenty of liquid credit to fuel the drive, construction companies threw together homes in increasingly out-of-the-way locations with little by way of amenities in the locality. Whole estates were being bought pre-construction by people who had no intention of ever living in the houses they purchased. Speculation on poor-quality product was a key factor in the crash. When it came, “ghost estates”—whole streets of these empty, low-grade properties—were left behind with nobody to live in them. Continue reading