Oh we do like to be beside the seaside at least before tax incentives run out

Everybody likes to be beside the seaside - especially when there are generous tax incentives to be had by putting spare cash into a holiday house or apartment in one of the designated coastal resorts. The scheme is due to run out at the end of December this year and this, together with the imminent tax year end on April 5th, has fuelled a last-minute rush to buy up what is left on the market.

Since it was first launched on a pilot basis in July 1995, the tax relief scheme for resort areas has proved popular with investors, so much so that demand has often exceeded supply. In the early days of the scheme, Section 48 of the 1995 Finance Act allowed buyers to claim ex-site expenditure against all income. They could set off 50 per cent of costs against income on year one and 5 per cent each year thereafter, for a period of ten years.

There was a flood of investors, mainly from high-earning PAYE workers and double-income families, according to the selling agents. In April 1996, relief was restricted to rental income only (including income from rents elsewhere) as with Section 23 properties. Applications already agreed under the more wide-ranging Section 48 relief were ring-fenced.

However, any applications made up to April 1996 remained eligible for unrestricted relief, even if they were not yet completed. A few of these developments are coming on the market this year and attracting strong interest.

About £290 million has been invested so far, according to a recent estimate from the Revenue Commissioners. They say they are "currently reviewing the scheme" so a further extension or new variation cannot be entirely ruled out.

The Government's plan was to boost tourism by increasing the supply of rented holiday accommodation and visitor attractions in the chosen areas. Eligible projects include any visitor accommodation registered under the Tourist Traffic Acts such as self-catering accommodation, hotels and hostels, and camping sites. Leisure facilities, theme parks, Irish language schools, amusement centres and car parks also qualify for tax relief under the scheme. The new holiday homes have received a lukewarm welcome from residents in some of the designated areas, notably Lahinch and Achill. Locals complained of being excluded from the plans for their area and of the lack of planned amenities such as shops or leisure facilities to service the houses being built. There were objections that the futuristic "toblerone" design of some of the developments - particularly in Achill - were not in keeping with the surroundings. Others claimed that investors from outside the locality were the sole beneficiaries of the scheme.

Developers and selling agents are understandably more bullish. "Employment has been created both for workers on the sites and through the long-term management and upkeep of the holiday houses. There is also the knock-on effect for the towns from extra tourism in the areas," says David Lawlor of Hooke & MacDonald, which has a range of seaside resort properties on its books. To qualify for tax relief, properties have to be registered with Bord Failte and available for holiday letting from April to October for a 10 year period, with no one person occupying the house for more than two consecutive months or more than six months in any year. Owners who sell before the 10 year period is up are liable to pay back the tax benefits. Rental income, though dependent on the vagaries of Irish weather, is more or less guaranteed in the summer months, with rents averaging £400 to £500 per week for a three-bedroom unit in peak season.

At around £150 per head, this is more attractive to holidaymakers than paying £50 a night for hotel accommodation. The average gross income for a seaside rental property should be in the order of £5,500 to £7,500, according to one selling agent.

Most of the schemes are built to Bord Failte four-star standard and come already registered and with a management package set up. In some developments, the houses are sold furnished and ready to let. Designated towns close to Dublin, such as Bettystown and Arklow are attracting first-time buyers and retired couples who plan to use their house or apartment as a permanent home once the tax relief period has expired.

One viewer of Hamilton Osborne King's Branogue Park development at Courtown last week was not interested in the tax relief. An affordable starting price of £82,950 for a two-bedroom mid-terrace house has encouraged her to consider commuting from Courtown to work in Bray, Co Wicklow, a distance of about 50 miles.

With the seaside resorts scheme due to run out at the end of this year, developers of qualifying projects are hurrying to have a minimum of 50 per cent of the cost of their project incurred by the cut-off date of June 30th this year.

IT MIGHT be too late to scout around and find a seaside property in time for the current tax year. There is a selection of holiday houses on the market however, qualifying for either Section 48 and Section 23 relief, in time to be included in next year's tax return.

"There is still a good choice around, but people are out there buying up the available Section 48 properties," says David Lawlor. "There is a limited supply in seaside areas, so my advice is to get out and book now for the next tax year."