City Living: What possesses Irish investors to risk money on a property development on the other side of the world? Often they will buy off the plans into developments they haven't seen and that will not produce a rental return for several years, writes Edel Morgan.
To the intrepid Irish investor, it appears that nowhere is too far-flung if good capital appreciation is on offer. Extreme weather conditions, language barriers, and unfamiliar legal and conveyancing procedures are often no obstacle if money is to be made. Their appetite is legendary - in recent years the Irish have been buying in such diverse locations as New Zealand, Australia, China, Brazil, the Dominican Republic, Canada, South Africa and Dubai.
The Irish investor will scour the globe to capture property that offers capital growth. This is more important to them than rental yield - although a property that offers both is highly sought-after. Often they will buy without even setting foot in the country they are investing in - preferring to buy from home, let a management company take care of the day-to-day hassles and sit back and wait for the returns. Should they ever decide to take a look at their investment, the trip is tax deductible.
Slower growth and abysmally low yields from Irish property have spurred them to explore far off locations. More accessible foreign locations - like the costas of Spain and the golf resorts of Portugal - have seen prices rise dramatically and rents dip due to oversupply. Prices are even beginning to soar in some of the former eastern bloc and EU accession countries where investors have been lured with promises of 15 per cent gross yields.
Gillian Ryan of Jackson-Stops says that, while parts of France, for example, will produce a yield of 5-6 per cent net, capital appreciation will not be huge, at least in the medium term "unlike in New Zealand and parts of Canada".
While Irish investors have the reputation of being big spenders abroad, her experience is that many initially take the "softly, softly" approach. "You see many of the same faces over and over at exhibitions for foreign property. They might attend a few exhibitions before buying and take a year to settle on a location. Some will initially dip their toe in the water and buy one or two units in a location and then will come back and buy three apartments or a whole floor if they see it as a good product."
Jackson-Stops is exhibiting a development in Auckland, New Zealand called Lighter Quay this weekend in the Westbury Hotel. The last launch of apartments at Lighter Quay in November attracted a frenzied response from Irish investors who ploughed more than €15 million into the development - despite it being a 24-hour flight from Dublin. The lack of any stamp duty or capital gains tax was one factor driving demand for the luxurious off-the-plan apartments in Viaduct Harbour.
Set around a private, internal waterway with an indoor swimming pool, gymnasium and optional car-parking, it sounds impressive but apartments there won't start generating rent until next year at the earliest. Over 11,300 miles away, it may sound like a risky move, but the agents say some of the Irish investors who bought in previous launches have already seen double figure capital growth.
In November, prices for units there started at €152,000. This time around they are starting at €196,350. Rental projections provided by Jackson-Stops predict a 6 per cent net yield. But could the rental market have changed there or have become saturated by the time these units come on stream? Those who have already made money on Lighter Quay are probably not too bothered.
Canada is currently popular with Irish investors, says auctioneer Martin O'Mahony of Property Team O'Mahony Auctioneers, which is currently marketing an apartment development in downtown Toronto called King's Court.
Apartments there cost from €135,000-€169,000 and the purchase price includes land transfer tax, Canadian goods and services tax of 7 per cent, legal costs and management and letting costs for the first year. The apartments are fully furnished and equipped and have a 24-hour concierge, rooftop lounge, and whirlpool spa.
"I've been approached to market properties in Spain, Croatia and Turkey but went for Toronto because strict rules and regulations apply to developers, and they have a reasonable legal process."
Property analysts in Toronto have warned that a recent influx of investors have upped the vacancy rate from 1 to 4 per cent and low interest rates have made it easier for local people to buy. Martin O'Mahony, however, believes that Toronto remains attractive due to a large transient working population who have no intention of putting down roots there and the predictions for huge inward migration in the coming years.
"In Dublin you have to spend €350,000 to get a €1,000 return. In Canada you can spend one-third of that money and get almost the same return. An investor here might have a small mortgage on their house and raise equity of €100,00-€150,000 on it which will get them a good rental income, and provide them with a good pension."
