The show ‘Who’s buying Ireland‘ aired last night and raised some interesting points about the influx of foreign capital into the Irish property market. There was some very depressing feedback (at least on twitter) which implied that this was wrong/evil/a sell out/our profits which we are being denied/etc. or that this was somehow wrong.
Later on Primetime this general idea was further alluded to by Fintan O’Toole and David McWilliams. Robert Hoban of Allsop was also on the panel, his firm has dealt with all types of buyers said that they ‘don’t discriminate’ and that is a vital point, is it any persons role to say who can or cannot buy something in a free society?
If there is any type of collusion or wrongdoing that is a different matter, but as far as we can see none of the buyers mentioned yesterday were accused or implied to be guilty of this.
In this firm we have seen a massive increase in foreign buyer interest, to the point that we decided to increase the fees we charge foreign applicants. This is in part to deter speculative interest, but is also justified as you end up making more long distance calls, getting documents translated, receiving letters of comfort from foreign banks about the accuracy of the records and a myriad of other things such as trying to order foreign credit checks etc.
So who are the buyers? They come in all shapes, one thing we can say is that every single seven figure purchase price related loan this firm did in 2013 without exception went to foreign buyers and without exception they all bought nice family style homes in South Dublin. And every single seven figure loan (eg: purchase price 1.9m borrowing 1m as opposed to previous example of buying for eg: 1.5m borrowing 500k) also went to foreign buyers who bought nice family style homes in Dublin.
So to think this has ‘no effect’ on the market is simply untrue. As for the buyers, the Chinese ones are all based here already, the ones that aren’t tend to be coming in to buy in cash. The US/North America has the most interest followed by Australia and the UK with the likes of Hong Kong and other ex-pat friendly zones.
They are buying desirable family homes in areas they want to return to one day and the see value here and are willing to pay to close deals, the frustration of trying to do this from afar (because everything takes longer) and costs that go with it also make them a slightly more aggressive bidder which can make things difficult for people based here who don’t have the same purchasing power.
Foreign buyers overwhelmed some lenders like KBC to the point that they have had to increase criteria due to the interest, this means they will only look at more low risk credit clients (ie: higher earners, we have not seen any sub €100,000 earners get anywhere of late whereas they used to).
Getting a foreign buyer has several key advantages to a regular Irish buyer, firstly you charge Buy-to-Let rates on what is effectively a family home. Secondly you pick up additional business from the high flyer – that was what was really behind the Investec intention to re-enter the market here. Third you have a loan with a far lower than normal loan to value – generally these buyers are putting down 50% and more.
Right or wrong put yourself in the banks shoes, do you lend €500,000 for two houses in Donnycarney with 90% loans to normal people at 4.3% or €500,000 where the security is an asset in one of the nations best neighbourhoods to a person earning €300,000 a year in Hong Kong with a loan to value of 30% at a rate of 5.8%?
It really is simple mathematics.