Property Investor

A good summer could give the depressed holiday homes market a welcome boost

THE spell of warm weather has prompted interest in the Irish holiday home market which is barely moving because of the uncertainty about job security, lower incomes and the difficulties of negotiating any kind of a mortgage.

It’s hardly surprising that there are more holiday homes for sale at the moment than at any time in the past. A great many of them were built under the tax incentive schemes and with the tax breaks now well and truly exhausted and decent rents only available for a few weeks in July and August many owners would naturally like to sell out and reinvest their capital in new and second hand apartments and houses which are now going for a song in most cities and towns. It has taken time for many investors to realise that the risks of putting money into bricks and mortar are reduced in large urban centres.

In 2005 the ESRI estimated that there were 40,000 holiday homes in Ireland – up from 15,000 in the early 1990s. The frenetic building boom of 2006 and 2007 would have added a few more thousand, most of them in seaside resorts and obscure villages and towns which come to life only in the high season.

The 1995 to 1999 Seaside Resorts tax scheme alone led to the construction of more than 5,000 holiday homes and apartments in 15 seaside towns but, surprise, surprise, it cost the Exchequer up to €380 million in lost tax revenue. That seems small beer compared to the €22 billion already blown on Anglo Irish Bank. The original plan had been to limit the tax concessions to a small number of seaside resorts but once one backbench TD got approval for the scheme in his constituency other TDs naturally lobbied for the same incentives for their own neck of the woods. The tax scheme was originally seen as a passport to prosperity for many of the struggling holiday resorts.

Unfortunately, it proved nothing of the sort. An expert inter-Departmental group later found that the overall effect was contrary to national tourism policy in that the scheme took from the unspoilt beauty of the areas affected.

A key issue that emerged was that the number of houses built was, in some resorts, huge in comparison to the local population. An example was Enniscrone, Co Sligo, where 379 houses and apartments were built in and around a resort with a population of just 692. And there were others, such as Bettystown, Courtown, Achill and Lahinch, where over- development was common and vast estates now lie empty from September to June.

Even with prices down by up to 50 per cent in most resorts, summer houses are difficult to shift in a depressed market. There are exceptions in some of the best known tourist areas such as Connemara and West Cork, where UK buyers are still on the lookout for a bargain. Skibbereen estate agent Charlie McCarthy has anything from 60 to 70 holiday homes on his books in places such as Skibbereen, Bantry, Kenmare, Glengariff, Rosscarbery and Baltimore.

McCarthy says they can find buyers for houses that are sensibly priced but they are still telling some vendors that unless they cut the asking prices it is a waste of time putting them on the market. One vendor who has taken that advice owns three three-bedroom semis with Section 23 tax breaks in Glengarriff which were originally making €280,000. They are now available at €100,000 each.

Maureen McKeown, the Salthill (Galway) based estate agent says that with a variety of summer homes on offer over the past 18 months, ranging from a three-bed in Spiddal with views of Galway Bay to two-bedroom apartments on the doorstep of Salthill, they had not been busy. There were few enquiries and even fewer viewings.

“However, with the fine weather we have had a recent surge in brochure requests which might indicate that although people are being ever so cautious they are also seeing for the first time in a long time how damn beautiful this country of ours is when the sun shines and might be playing with the idea of airing out that cash laden mattress. Or maybe that’s just wishful thinking . . .”

Unlike most seaside resorts Lahinch does not cater for the cheap end of the market, according to Michael Leyden of Leyden estate agents. Most of those selling properties were well heeled and wanted to get out of the property tax net but were not prepared to lose money on the deal. Many of the sellers put their holiday homes on the market after experiencing the bad weather of recent years and in some cases burst pipes over the winter. They were prepared to wait a year or 18 months until they got the price they wanted.

Clifden auctioneer Matt O’Sullivan is kept busy with overseas viewers – most of them from the UK – still looking for out-of-town homes in Connemara with good views. Matt’s daughter, Sinead, says they are also handling an increased number of enquiries from the east coast, particularly Dublin, for holiday homes in towns and villages such as Clifden, Cong and Clonbur – so that the new owners could walk to local pubs or restaurants.

Liam Farrell of DNG Farrell in Carrick-on-Shannon said that while the holiday home market has been flat there has been a significant uplift in enquiries and viewings since Easter. These have come mainly from cash purchasers and people with low gearing. “As the credit crunch persists investors and second home purchasers seem to be unbankable,” he said.