Ireland’s bargain properties: one in four sell for under €100,000

The recession has been and (almost) gone, Michael Noonan is readying a €1 billion budget giveaway and the rental market is in overdrive. But despite the economic prognosis, properties are still selling for knockdown prices across the country.

Latest analysis of the property price register (PPR ) shows that some 25 per cent of properties sold in Ireland in the first eight months of the year went for €100,000 or less, while more than 400 properties sold for €20,000 or less.

What’s going on?

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Depressed prices: a sizeable number of properties selling for less than €100,000 are selling for not “full market value”.

According to the property price register, which details the price of all transactions across the country, in the period from January 1st to August 31st, 2016, a quarter of all the properties which were successfully sold, went for €100,000 or less.

Indeed some 6,990 properties sold below this figure, accounting for 25 per cent of the 27,970 transactions during the period. And it’s not a new trend; in 2015, some 8,829 properties sold for €100,000 or less in the same period.

It's a remarkable figure given that property prices have risen on a national basis by 43.2 per cent since the trough, according to figures compiled by the Central Statistics Office (CSO), and supply is tight right across the country.

And the trend is unlikely to disappear in the short term; a quick search on Daft.ie for example shows that more than 3,600 properties are for sale around the country at a price of less than €100,000, with almost 500 of these going for under €50,000.

Where are these knockdown bargains?

According to the price register, one in 10 properties sold under the €100,000 threshold are in Cork city and county. Limerick, a city highlighted by an international survey earlier this year as being the most affordable place to live across 367 global cities, also has a fairly plentiful supply of cheaper properties, accounting for 6.7 per cent of the total. Even Dublin, with its elevated property market, also makes the top 10, accounting for 3.5 per cent of properties sold under €100,000.

And less urban counties, such as Donegal (6.5 per cent); Mayo (5.2 per cent) and Kerry (4.5 per cent) also feature strongly.

Why are sale prices so low?

A sizeable number of properties selling for less than €100,000 are selling for not “full market value”. According to the Revenue Commissioners, reasons vary; a 50 per cent share of a property may be transferred from someone to their spouse for example, with the PPR only recording the value of the 50 per cent share transferred. Similarly, if properties have non-residential elements, the price register only shows the residential value.

So a pub with an attached residence upstairs would comprise a non-residential element (the pub) and a residential element (the upstairs living quarters): the PPR would only reflect the residential element. Additionally, the residential element of a hotel or golf club would be listed in the PPR but might not accurately reflect the full value of the properties.

What are the properties?

Ghost estates, receiver sales, problem builds, holiday homes. A glance at the property price register reveals the problems inherited from the boom still at play across large tracts of the country.

Ill-fated holiday home developments feature.

At Carolans Court, adjacent to the four-star Kilronan Castle hotel, 60 holiday homes were built by the Hanley Group from Co Roscommon. Nama took control of part of the group’s assets back in 2011, and the hotel was put on the market last year, along with 48 of the holiday homes. The hotel sold in January of this year and, according to the price register, 29 of these holiday homes sold for €20,000 each in April.

But, while it might sound like a startlingly low price for a three- or four-bed property, the holiday homes were included in the overall sale of the castle, and the low price reflects this. In addition, only about 14 of the holiday homes are currently being rented, with the others not yet fully constructed.

Planning permission also restricts the potential sale price of holiday homes, with such properties only allowed to be occupied a certain number of days per year.

Multiple apartment transactions also account for a certain proportion of properties under this threshold, with investors potentially acquiring apartments at knockdown prices.

In Limerick, for example, one probable investor acquired nine apartments at the Broad Leaf development in the city centre for just €65,000, or about €7,200 each. An investor could expect rents of about €400 a month for a two-bed at the development. In nearby Shannon, Co Clare, 23 apartments were acquired for just €14,354 each at the Linden Apartment Blocks.

Student accommodation is also a common transaction. At Milligan Court in Sligo (formerly Milligan Place), 46 units were sold at €15,106 each, with monthly rents of about €600 expected at the development.

There are also some properties with evident problems on the list. Twelve properties at the Chestnut Grove in Donegal development, including six three-bed homes, were sold earlier this year at the Allsop auction for just €33,333 each (399,996), beating the reserve of €350,000-€375,000. However a neighbouring property has tested positive for Mica-muscovite, which leads to crumbling bricks, which may be a reason behind the knockdown price.

So-called ghost estates, which were never finished when the boom burst, also feature. At Allow Hill in Freemount Village, a development of three- and four-bed houses in the northwest of Co Cork, some 33 properties have been sold so far this year, with prices ranging from €34,723.86 each (for 22 properties sold in February) to €74,889 for a property sold in May. Of the lot of 22 houses, 11 had a builders yet to finish, while 11 were complete and were generating a rent roll of €4,260 a month or €51,120 a year.

What about the ordinary buyer?

Despite many bargain properties being primarily suited to investors with a wad of cash, other properties are selling at knockdown prices for the simple fact that prices remain low in large parts of the country.

Last month, for example, GeoDirectory found that three counties in Ireland have an average sale price of less than €100,000: Longford (€80,357); Roscommon (€88,317) and Leitrim (€91,608).

Longford auctioneer Padraic Davis says that prices have recovered strongly this year – but from a very low base.

“In some cases in Longford, properties have doubled from where they were – they were selling for the price of cars,” he says, noting that two-bed apartments were going for €25,000, but are now back at about €53,000, while a three-bed semi in Longford town was €55,000, but is now up at €120,000.

“At the lower end of the market, properties have doubled in price,” he says, adding, “this year we’ve seen by far the biggest gain”.

About 95 per cent of sales in the €30,000-€50,000 price bracket would have been cash sales, Davis says.

The problem now is “a massive shortage of property”.

“We’re down from listing 60-70 properties to 20,” he says. “We’re experiencing the exact same thing as in Dublin, Cork or Galway; we can’t get rentals, we can’t get stock.”

But despite shortages of supply, the depressed value of properties means that, economically, the figures don’t stack up to build more.

“There will not be a house built in Leitrim, Donegal, Longford or Roscommon from where property prices are right now. Prices will have to double again before a developer would do it,” Davis says.