Good value for investors in west Dublin as long-term demand assured

West Dublin is growing so fast that if you blink you might miss a new development. But investors have recently been thin on the ground and reluctant to invest in the new schemes.

Estate agents blame the tax changes wrought by the Bacon report, but it's a strategy they regard as a knee-jerk reaction and one that ignores the good value to be had in the area, with new houses from just over the £100,000 mark. Capital appreciation is steady and long-term letting potential assured, with high-tech firms well-established and the accessible M50 enabling commuters to move in all directions.

Not only that, the traditional rental market is set to grow even further if lending institutions are forced to adhere to strict Central Bank guidelines and even more first-time buyers have to sit it out longer to buy a home.

Ray de Courcy, of Douglas Newman Good's residential letting department, says that with high rents in the city, tenants are increasingly moving out of town. "Most young people only want to spend so much on rent. They have a budget of about £250 each and want to save for a house. They are looking to share houses for around £500 a month if they can."

Prices average around £550 to £660 for three-beds in such areas as Cyber Plains in Leixlip and Louisa Valley. St Raphael's Manor in Celbridge is also popular, though the rents can be higher, with Lisney asking in the region of £750 for a three-bed. The west Dublin area has been rapidly colonised by people working in companies such as Hewlett Packard and Intel, in Leixlip, and Telemecanique in Celbridge. But inquiries come from people living even further afield: "We've had a lot of interest from people working on the power plant in Offaly for the Finnish firm Fortrim. People are renting in west Dublin so they can go one way for work, and then in the other direction for their social life. People are going to travel a lot more," says Ray de Courcy. "We've found things getting a lot stronger out here in recent months. Business is certainly moving in terms of renting."

Brendan Byrne, a partner in Ross McParland, has sold nearly 3,000 houses in Hunters Run and Bramblefields in Clonee. The first-timers are out in force, and investors have been feeling the pinch in the wake of the Bacon Report. "The investors have dropped dramatically out of the market since last year," he says. "They represent only about 2 to 3 per cent just now. At the very most, it's about 5 per cent. In terms of returns, the figures just don't add up for them anymore," he says.

The lightweight investor can't afford to subsidise the rents, he says. "But that person makes even less by leaving cash in the bank, so buying still makes sense." A three-bed in Bramblefields cost £105,000 at the end of last year but this had translated into £115,000 by phase two earlier this year. "Capital appreciation has certainly been in the region of 5 per cent this year, ahead of bank deposit rates," he adds. Still on the books is a three-bed semi at £120,000 in Pheasant's Run in Clonee, as well as two-bed townhouses in Bramblefields for £105,000.

Carina Warner, of Hooke and MacDonald, confirms that investors have been slow to make any impact in recent times. The company is a major player in selling new properties in west Dublin, with Larkfield, in Lucan, recently launched off the plans. "The Bacon report seems to have had some effect," she says. "The investors have certainly eased off."

However, she points out that properties in west Dublin have good income potential. "There is a steady demand for rental accommodation in west Dublin generally," she says. "Although the computer companies are not recruiting as much any more, there are a lot of renewals. For the investor, there is good value in property."

And IBM in Blanchardstown has been bringing in executives from abroad on short-term training stints and has been interested in six to nine month leases, says Carina Warner. "There is always a steady demand. Rents are less in Blanchardstown but higher in Castleknock."

Three-bed houses in places like Esker Lawns or Easker Meadows in Lucan fetch from £600 to £650 a month, she says, while the four-bed goes for £700 to £750. Young professionals are the favoured tenants. And there is a growing market too from young people who grew up in the older estates in Lucan and Leixlip. Keen to stay in the area they are keen to rent locally.

Geoff de Courcy, of Douglas Newman Good's Celbridge office, confirms the impact of the Bacon Report. "We're finding that since the Bacon report, prices for the average three or four-bedroom semi became unattractive to investors."

Not so long ago, prices in Castletown in Celbridge started at £90,000-plus for a three-bed semi, which now rents out for £500 to £600 a month. "A lot of people are coming out of the city." Jennifer Walsh, of French Estates, also confirms that the new house market seems to be dominated by owner-occupiers. "We don't have the investors at the moment but then the big computer firms aren't recruiting," she says. Groups of young people working in local companies are most attractive as tenants, she says. A three-bed in the Leixlip area rents for about £550 a month in an estate such as Cyber Plains. "And people will pay more for a really good house."

The market is set to change again. All the agents point to the recent interest in the area by the Eastern Health Board, with enquiries about housing refugee families on the increase. Brendan Byrne says that if investors were prepared to rent to the health boards, houses would be rented non-stop.

He adds that with 1,200 Kosovan refugees expected shortly, it will inevitably escalate demand for rented property. And Ray de Courcy believes that Dublin will inevitably go the way of other European capitals, with more people renting than buying. "They certainly won't want to pay top city rates, which is why the suburbs are becoming attractive."