Investors are only opting for properties in good locations at the right price. Edel Morgan reports

The tax-break property market has become increasingly sophisticated, says Liam Farrell of Sherry FitzGerald Farrell in Carrick-on-Shannon, Co Leitrim, as investors become more discriminating and fewer in number.

"There is a huge amount of competition between tax incentive schemes around the country and owner occupiers are becoming more prominent, particularly when it comes to waterfront schemes or where there is an attractive lifestyle aspect," he says.

He believes the level of Section 23 units being marketed to investors cannot continue at the same pace. "They are reaching critical mass. We will see less of the larger schemes of 50 to 100 apartments and more niche developments of smaller mixed courtyard schemes in towns and villages to appeal to single people." He says Leitrim, and in particular Carrick-on-Shannon, has benefited greatly under the Rural Renewal Scheme with a plethora of tax-based developments on offer and more in the pipeline. "Very few fiscal incentives were offered to the region before and, when we were given the opportunity, we were hungry and motivated enough to make the most of what was being offered."

The Budget granted investors some breathing space by extending the deadline for the construction of tax incentive-based schemes to 2006. When the old deadline of December 31st, 2004 loomed, some investors were advised to snap up tax-break properties and hoard them with a view to selling them after the deadline when they became scarce. The 2006 extension has afforded time to take a more cautious approach.

Jim Clery, tax partner at KPMG, views tax-break property like any other investment. "I'd advise there is some really good value out there but not every Section 23 deal is a good one. The investor should look at whether it is an up-and-coming area, a good quality scheme, if they'll be able to get a decent rent and if the builder is charging too much. Most investors are pretty sharp when it comes to choosing a good property anyway."

His advice is similar with Section 50 student accommodation. "There is quite a lot of Section 50 product about and people should take care they know what they are buying. They should buy them to rent to students long term - not with a view to turning them back into flats after 10 years, when they may well come up against opposition from other owners in a complex. If the price is right and rents are right, go for it. If not, then don't."

Auctioneer Sean Daly, based in Kenmare, Co Kerry believes that tax-break properties are being sold through accountants to people who don't know where they are buying into. "I would say to people to be more pro-active and find a tax incentive property that will appreciate in value and one they won't be left with in 10 years because it is unsaleable, which is happening a lot in my opinion."

Section 23-type relief was introduced in the early 1980s and has been extended since then. The Finance Act 1998 introduced reliefs targeted at the upper Shannon region covering parts of Cavan, south Sligo, Roscommon, Longford and Leitrim - the Rural Renewal Scheme. The Act also provided for a scheme of relief for certain urban areas.

The Town Renewal Scheme provides tax reliefs in towns outside the Urban Renewal Scheme. Five cities and 138 towns are eligible, with a potential for 6,000 units. So far, according to Department of Environment and Local Government statistics, 348 planning applications were received under the town and urban renewal schemes in respect of 2,168 dwellings of which 1,225 have been certified by the department. Around 2,746 rural renewal planning applications have been received in respect of 6,167 dwellings, 3,260 of which have been certified by the department.

Introduced under the Finance Act of 1999, Section 50 provides for tax relief for rented accommodation for third-level students. During the college term students are encouraged to rent accommodation in the approved student village. Outside of the academic year the accommodation may be rented to non-students, like tourists. According to Department of the Environment figures, 122 applications have been received in respect of 5,128 units representing 20,443 bed spaces and 1,947 have been certified by the Department.

Paul Stephenson of Sherry FitzGerald O'Connell in Tralee says it is important that planners and educational institutions are aware "that there is nothing worse than oversupply. The Government want students housed but, on the other side, you could see a situation where there is a surplus of empty units. The key is that they are close to the institute or college they are affiliated with."

Living over the Shop (LOTS) was introduced to boost the supply of residential accommodation in Dublin, Cork, Galway, Limerick and Waterford. A total of 28 planning applications have been received in respect of 129 dwellings - 13 have have been certified by the department.

"Urban renewal is desirable in the way it has targeted urban areas in strengthening residential and commercial development in Irish town centres bringing them into line with the continental models of the mixed-use urban centre," says An Taisce a spokesperson, "otherwise there would have been sprawl on the fringes." While the An Taisce spokesperson describes the provision of student accommodation under the Section 50 scheme as "desirable", it says there is a "a difficulty with bad planning in the provision of student housing in some locations. There have been a number of planning applications for large apartment blocks in older residential areas and not enough emphasis on providing on-campus accommodation. The design of this student accommodation can be appalling."

The Rural Renewal tax incentive scheme is described by the An Taisce spokesperson as "well meaning but problematic". "An extreme example is Leitrim where 66 per cent of houses built under the scheme in 2002 were holiday homes and second homes under the scheme, with units empty most of year. Urban renewal has been positive and reversed the decline of some towns but these lucrative tax incentive schemes should be subject to full environmental impact assessments which has been a matter of concern for the European Commission."