Wednesday 17 December 2014

The ten most popular destinations that enticed Celtic Tiger Irish buyers

In the first of a two-part series Mark Keenan looks at the ten most popular destinations in which boom-era Irish buyers made over 200,000 property purchases and discovers just how the investments panned out

Published 24/10/2014 | 02:30

Dubai was a hotspot for investment
Dubai was a hotspot for investment
Cape Verde was popular
Florida was a hotspot
Sofia in Bulgaria
Costa Del Sol

IT was mid-2006, the Celtic Tiger was roaring (albeit with early signs of a frog in its throat) and Dublin taxi drivers were busy re-mortgaging their homes to buy holiday home apartments in Cape Verde, Dubai and along Bulgaria's Black Sea coast.

Some were even investigating Jonestown-like enclaves hacked out of the jungle coast of Brazil as well as apartments on the other side of the world in New Zealand.

At a point in time when it was estimated that we Irish were spending over a billion euros per year on overseas properties, the foreign home market was experiencing a huge injection as the first tranches of €14bn, released under the Special Savings Incentive Accounts (SSIA), were awash in Irish pockets and with Irish property prices at an all-time high, much of that was being used to buy property abroad.

In June 2006, Prestige Properties, the leading seller of overseas bricks and mortar to Irish investors at the time, brought out its first 'International Hotspots Index' indicating the best places for Irish buyers to acquire second homes. Warsaw topped the table followed by Florida, Cape Verde, the Algarve and Sofia. Also included were the Costas in Spain and Cape Town in South Africa. France and Britain (cities like London, Leeds and Manchester) were also hugely popular with a sea of Irish investors.

So, eight years after the dust has settled on a world economic crash, a massive Irish property crash and the near bankruptcy of the country itself, how did the taxi man's SSIA investment fare?



In 2008 the Bulgarian property market collapsed. Reliant on overseas purchasing from Russia, the UK and Ireland, it stuttered and stopped when buyers from the latter two dried up. Property prices fell by 30pc in two of the three most popular locations - the Black Sea and in Sofia, the capital. The ski resorts saw values collapse by 50pc by the time the market reached bottom last year. They have been static since.

Dylan Cullen's company Appreciating Assets runs an office in Dublin and three in Bulgaria in the areas where it is estimated that the Irish bought 50,000 properties, largely between 2003 and 2007. He has spent a number of years offloading properties on behalf of stricken Irish - mainly to Russian buyers.

"The funny thing is that most Irish buyers I have talked to recently were glad they bought in Bulgaria. Because the loans were taken out here in Ireland, they were not impacted by any issues with the Bulgarian banks. It also meant that although they might have sold for 30pc less than they purchased, they were getting cash to bring home in a market where values fell by 60pc. So if they reinvested at home, they did well," said Dylan.

"There are two types of buyers. Lifestyle buyers appreciate going to a country with lovely beaches or ski resorts where the locals get paid five grand a year and it means that they can live like kings on their holidays.

"These don't really care. Investors are looking to get their money out and are taking a hit. At the moment Russians are buying because they fear capital acquisition sanctions.

"But in the medium-term, development has started again, the Bulgarian economy is flat and it still has 100 miles of virgin coast to develop. My advice is, if you're a lifestyle buyer, then you don't need to worry. If you're investment driven then prices are likely to remain flat for many years to come, so you'd be better getting your cash back to Ireland."



The UK-based network Knight Frank recently rated Dubai as the "world's hottest property market" and last month its developers announced 27 new projects.

Values more than tripled between 2002 and 2008 when the tiny oil rich Arab state was dazzling the world with Palm shaped islands in the sea and 'The World' - an archipelago development laid out like a map of the world in which buyers could acquire islands shaped like the countries. In 2009 the market went on its ear to the degree that prices collapsed by 58pc by the time the market reached bottom.

Dubai need its own "bail out" loan from a neighbouring Emirate in order to pull through. Meantime, Irish buyers were forced to gather together to take legal actions against developers as apartment blocks they'd purchased failed to complete. Worst hit was Irish developer John O'Dolan who purchased the 'Ireland' island in The World - he committed suicide in February 2009 after his consortium ran into trouble.

Those who bought apartments there in the boom will be relieved to know that since early last year the Dubai market has rebounded sharply by 20pc. With 27 projects launched last month alone and an investment charge led by Indian buyers.



The island archipelago of Cape Verde, off the coast of Africa, was hailed in 2006 as the "new Caribbean". Property values have held up remarkably well here despite the general failure of many apartment schemes to sell out and the failure of much of the large scale infrastructural development promised. Two bed apartments which cost €100,000 in 2006 in the property hub of Sal are still priced at between €100,000 and €115,000 despite issues primarily with water supply.



The USA's sunshine state made second place in the Prestige chart of 2006 "hotspots" for Irish buyers. But those who bought villas in Florida as flogged to them by Irish entrepreneurs in that year bought right at the top of a bubble which would burst the following year.

By the time prices had stopped falling in 2012 Florida homes had shed 55pc of value, to the extent that at one point you couldn't actually give a house away in some parts of the state.

The good news for those who hung in there is that prices have rebounded by 20pc since early 2012 and are still in rapid ascent.



Those who bought in the booming Spanish market at the height of the Costa bubble have fared among the worst. Prices began falling in 2007 and haven't stopped since. Depending on the resort, the loss to investors has been phenomenal - between 40pc and 70pc.

In many ways the Spanish handled their property market worst of all - continuing to build at pace for at least two years after it was apparent that there was no one to buy them in a country heading for 25pc unemployment.

A quarter of all Brits left Spain last year - just over 90,000 of the expat population. But the international smart money investors who began buying property in Dublin in late 2011 are now sniffing around here. There are early reports of a turn in values for cheaper properties. Watch this space.

Next week - The UK, Warsaw, Cape Town, France, The Algarve

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