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Charlie Weston: ‘Investors and downsizers are the cash kings in property realm’

  


(Stock picture)
(Stock picture)

People struggling to qualify for a mortgage will be bemused that so many buyers can sidle up to an estate agent and offer to buy a property with cash.

Almost half of the residential properties bought last year were purchased with cash or savings.

Surging price rises and Central Bank mortgage restrictions have meant many want-to-be buyers have to keep on renting.

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This has prompted a slowdown in the rate of increase in property prices. But prices are still 83pc higher than the bottom of the market just six years ago.

The price surges and the lending limit that say a buyer can only get a mortgage for no more than three-and-a-half times their income have priced the garda and nurse couple out of the market. They can probably only afford a mortgage of €310,000 at the moment, not enough for a house in Dublin and other large cities. There are no such worries for cash purchasers.

So just who are these cash buyers?

The biggest group of cash buyers are made up of institutional investors, according to director of research at Savills, John McCartney. He calculates that around 11pc of all purchases of residential property last year were by large property funds, which are often foreign owned, or stock market REITs (real estate investment trusts).

Small-time investors are still active. There are few investments Irish people prefer more than bricks and mortar, even if stock market returns are better in the long term.

Investors are people who have made money in the past, and have savings in the bank earning little or nothing in interest. They did not lose out by getting into the buy-to-let market at the top of the property cycle.

You can get a better return investing in a buy-to-let than putting money in the bank where it will earn less than 1pc, even if there are huge hassles being a landlord.

These small time investors are out-bidding mortgage buyers who are forced to rent from the investors, a situation that keeps rents and property prices high.

There is plenty of money available for property investment, as Central Bank figures show households have around €100bn in savings in banks and credit unions.

Many young people may not be able to qualify for a mortgage, but older people are asset and cash rich.

Another big chunk of cash buyers are people selling a home which is now too big for them. Downsizers sell their own house and are in a position to pay cash for their next purchase.

Trader-uppers account for many cash buyers. They sell their house and have cash to meet the shortfall for a larger home.

Then there are rich parents who can afford to buy homes with cash for their first-time buyer offspring. And any of these different categories of cash buyers will always trump a mortgaged buyer in a bidding war.

The old cliché that cash is king is even more true in the property game.

Irish Independent

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