Often big and unwieldy and a headache to maintain, pre-1963 properties have been out of favour with investors for some time - but could be on the brink of a comeback. Owning a pre-1963 property divided into flats could now be a more attractive proposition following a recent Government decision to allow refurbishment capital expenditure and routine maintenance work to be offset against rental income for tax purposes. This applies to properties converted from a single unit into multiple units prior to October 1st 1964, when the 1963 planning legislation came into force.
There are conditions, however. To qualify, properties must have at least three units and at least 50 per cent of the units must be made available to tenants in receipt of Social Welfare assistance. While it's too soon to gauge the true impact of these measures, which are to be included in the Finance Act, estate agents are reporting a resurgence in the number of inquiries from investors looking to buy buildings with pre-1963 declaration. The pre-1963 dwelling has been a long time out in the cold. In the 1980s and 1990s, the advent of Section 23 tax incentives to rejuvenate fringe and derelict urban areas sounded the death knell for these converted houses.
The lure of shiny new city centre apartments with generous tax incentives proved stronger than that of the high-maintenance period building subdivided into bedsits and self-contained one and two-bed units that could be a potential firetrap if not upgraded to meet safety regulations. Many were sold off and reconverted to single use as areas of "flatland" were reclaimed by professional buyers seeking characterful family homes.
Post-1998, anti-investor measures recommended by Peter Bacon and imposed by the Government have prompted the reconversion of even more of these multiple-unit buildings into family homes, thereby boosting their value.
Smaller, more manageable pre-1963s with gardens in desirable locations are the most sought after by the owner occupier - a factor that has significantly depleted the current rental stock. These days, there are very few of the traditional pre-1963 properties set in self-contained units on the market. Most of the estate agents contacted said they have two or three on their books at present. The larger three or four-storey over basement house with a small rear yard is unsuitable for family life and unless refurbished and in a prime location has also been rejected by the investor.
The new measures follow recommendations made by the Commission on the Private Rental Residential Sector in an attempt to increase the supply of affordable rental accommodation.
Given that capital expenditure on refurbishment work will be allowable as a tax deduction, will the pre-1963 unit become a more desirable option for both tenants and investors?
"People who were ringing three years ago have suddenly started to ring again," says Robin Palmer of Gunne Residential. But he admits that good pre-1963s can be hard to get.
In 1999, the Combat Poverty Agency found that there is still evidence of substandard accommodation, particularly in relation to bedsits. "If one was to put the strict rigour of fire regulations into effect, a lot would not pass," Palmer says. The new measures could mean that the value of pre1963s as investment properties will appreciate, says Simon Ensor of Sherry FitzGerald.
"We haven't seen the effect yet. It could bring activity back that has been significantly lacking since Bacon 1. We have three or four on our books at the moment and expect a lot more to come on. Another reason for this will be the roll-over relief on Capital Gains Tax, which means that if you buy another pre-1963, as long it has at least as many units as the one being sold, you won't be subject to Capital Gains Tax. I can see a lot of people with no borrowings left on their present place going for a bigger and better property as a result."
The upside of the recent trend toward conversion to family homes, says Ensor, is that some areas which were full of "tatty bins and bedsits" have come back into family life. The downside, he says, is that it has limited the supply of affordable accommodation and contributed to spiralling rents.
Some pre-1963s will remain as rental accommodation mainly because they are unsuitable for anything else.
"It depends on the road they are on and their size. Those very large four-storey over basement with limited back gardens on the Lower Rathmines Road would be very difficult to live in as a family and some lack car parking. They are eminently suitable as bedsitters or one-bed apartments." The 50 per cent Social Welfare stipulation will be viewed as a positive by some, "while others may not be thrilled", says Ensor. "Social Welfare pay the open market rental value and it will mean that a certain portion of rental income is guaranteed. Whether that 50 per cent is taken up is open to question. If not, can the state force you to leave some units available? The simple answer is probably no. It will probably be a case of, if the demand is there then you are obliged to make them available."
Ken MacDonald of Hooke & MacDonald is not convinced that the forthcoming legislation will herald a pre-1963 renaissance as most of the original stock is now "extinct".
"They were originally built as private residences and converted into bedsits, so it's only natural they have been converted back. The ones that remain in units are meant to be registered and to comply with safety and fire regulations but the bulk slip through the net. If they were converted prior to 1963, they needed no planning permission and it's hard for the local authorities to keep tabs on them since many are not registered. If they are not brought up to fire standards, they can be hard to sell because there is too much repair and maintenance needed."
He says any revival of the pre1963 unit could be "a retrograde step". "With the way the rental market has been decimated, they may make some sort of comeback but if that means that substandard accommodation becomes the norm then that would be unfortunate."
emorgan@irish-times.ie
