Sam Doran (66) lives in and owns an apartment in The Crescent, a 21-year-old apartment block in Park West in Dublin that has been plagued by defects.
In 2022, Doran, who has lived in the development since 2005, and fellow residents in the 257-apartment scheme to the west of Dublin city learned that they must each raise €68,000 to fix fire safety issues after the building had been deemed unsafe.
Doran and other owners of defective apartments are awaiting the Government’s €2.5 billion remediation scheme to fix fire safety and other defects in Celtic Tiger-era apartments, a scheme that is unlikely to be operational until next year due to delays.
In the meantime, some apartment owners are selling up, but – because of the defects – only to cash buyers as banks are unwilling to lend on the apartments as they are deemed too risky without a clear timeline and detail on costs of remediation.
For first-time buyers, apartments are considered more affordable and are often seen as a first step on to the property ladder but with banks unwilling to lend, The Crescent is an example of a defective apartment block where cash buyers have an advantage.
Doran says the apartments in The Crescent are going for €220,000 or €245,000 and cash buyers are seeing the value in buying there given that remediation work will eventually be covered under the Government scheme.
“It’s a bargain for others who have the cash because the Government is going to pay for the remediation,” Doran said, and when they do, the apartments will be “worth more” down the line for investors choosing to sell them on again.
This has put these apartments out of reach of mortgage-approved buyers.
People were being “locked out of the lower end of buying that way, until they start remediating these”, he said.
It is a broken rung on the property ladder where first-time buyers and others are losing out but where others are seeing opportunities and taking advantage of lower prices due to depressed demand for defective properties with an uncertain future.
[ Overseas cash buyers snap up bargain apartments that first-time buyers can’t get because of defects ]
It’s a big problem in Dublin ... nearly half, if not more, of the apartments I do evaluations on are in some way impacted by this now
— Richard Todd of Dublin firm Leonard Wilson Keenan
An investigation by The Irish Times has found that prospective home purchasers and first-time buyers are losing out to cash buyers – mostly overseas investors – on apartments with even minor defects because of the unwillingness of banks to lend.
Land Registry records show that apartments recently sold at The Crescent were purchased without banks registering mortgage charges, a sign of cash buying.
The official ownership records for the properties show that one apartment was sold to a construction company, another to a property management company and two to foreign nationals.
Another was sold, also for cash, to an Irish woman. The estate agent confirmed it was a “rental investment” for the woman.
Up to 100,000 apartments built between 1991 and 2013 have been earmarked for remediation under the Government scheme. These are properties where the problems were caused by defective design, workmanship or materials that breached the building regulations that applied when the property was built.
Estate agents have said they were identifying many apartments where defects were an issue and where, as a consequence, they are being forced to selling the properties to cash buyers instead due to the reluctance of lenders to provide finance.
It’s becoming “a big problem in Dublin”, said estate agent Richard Todd, associate director at Dublin firm Leonard Wilson Keenan.
He estimated that “nearly half, if not more, of the apartments I do evaluations on are in some way impacted by this now”.
“So many of the blocks are finding issues and the banks won’t draw down any mortgages on them,” he said.
Whether the issues were minor or large-scale, “it doesn’t matter, because once anything at all gets flagged under fire and safety, it just becomes a nightmare,” he said. It means many first-time buyers are “locked out completely” from buying them.
Instead, the apartments are sold to “investors, usually” depending on the rental income they can make from the property every year.
David Brock, director of Brock Delappe estate agents, said that attempt to sell these apartments “to anyone who isn’t a cash buyer is a waste of time”.
“Accepting offers from mortgage buyers will only frustrate them because they’ll only waste money on surveyors and get invested emotionally,” he said.
The issue was so widespread, Mr Brock said, that there were “at least three developments I can quickly walk to from our office alone that are undergoing fire audits at the moment, and you can’t get a mortgage on them”.
These apartments were “only being bought by cash buyers” and had to be sold at a 20 to 25 per cent discount, he said.
At a 200-unit development near Mr Brock’s office in Inchicore, Brock Delappe would have sold two to three apartments per year, historically.
“But now we haven’t sold one in years. We have stopped because we have advised people they will have great difficulty selling them without a big discount, and they don’t want to do that,” he said.
Another estate agent, Bridget-Anne Doran, a director of Dublin estate agent Doran Estates, said prices were “dropping in developments affected by this, and first-time buyers want to jump on that, because they will get remediated, whether through levies or the Government scheme. But they can’t get loans”.
She has found that, from experience, the majority of apartments going on sale have defects but these can be “very minor issues” such as an out-of-date fire alarm which means the property cannot be signed off with a fire cert, which in turn means the bank won’t lend.
Mortgage-approved buyers are “going around in circles trying to buy them because the sale always collapses at the last hurdle”, said Doran, who is a niece of Sam Doran, the apartment owner at The Crescent.
“It’s completely unfair. The market is already so small, and now you have the likes of the bigger vulture funds coming in to snap these up,” she said.
An apartment owner at an affected development in Dublin, who sold to an investor last year, said it was “devastating for owners”.
Lorcan, who preferred to be identified by only his first name, initially went sale agreed with a mortgage buyer, but it was only then that he became aware of the fire safety issues in his block.
“I couldn’t pass the trouble on to someone else. I wanted to take it down off the market and deal with it, but at the end of it I was left so stressed that I just needed to get rid of it for my own sanity,” he said.
“That’s why I ended up selling to an investor. It went for a pittance really.”
Fixing problem apartments is a major challenge for the Government.
The Minister for Housing received Government approval for the priority drafting of the Apartment and Duplex Defects Remediation Bill 2024, but it is unlikely the scheme will be operational for some time.
A spokesman for the Department of Housing told The Irish Times it was “important to point out” that an interim scheme was established, with 171 validated applications from management companies representing various developments, affecting 17,206 residential units across 27 local authorities. “Intense engagement” is continuing with homeowner representatives, the spokesman said. The Housing Agency, which manages the administration of the interim scheme on behalf of the Department of Housing, did not wish to comment, saying the was best placed to answer questions about the scheme.
With the scheme delayed until 2026, it means any apartments being sold will be limited to buyers with cash as no bank will approve a mortgage on a defective property.
One estate agent, who did not want to be named, said that in his experience defective apartments that were selling were being purchased by international buyers.
He gave examples such as “parents who have children travelling to live in Ireland to study in one of the universities, who’ll be there for several years”.
“It makes more sense for them to buy somewhere for their child to live in and sell up later,” he said.
Houses do not present the same problems because much of the problem centres on “common areas” in apartment blocks that the apartment owners must pay to maintain themselves.
“It’s the element of the unknown for the banks. Given everything that happened 15 years ago, they’re just not taking that risk. We’re seeing it come up all over the city [Dublin] now more and more regularly since about five years ago,” said the estate agent.
Telltale signs of an issue with apartment block is where a property is being advertised as being suitable “for investors” or even for “cash buyers only”.
Estate agents are obliged to disclose any issues with a property to a buyer, if the agent learns about it, the Property Services Regulatory Authority (PSRA) said.
Surveyor Cathrina Coyle, of CC and Associates, warned any potential buyers of apartments with defects “not to buy until they’re remediated”.
“We’re coming across this issue every day in properties we go into. Of course, there are also ones we thought should have been fire rated, but aren’t unfortunately. That’s how it goes,” she said.
“But I’d advise any buyer not to buy these until they’re remediated. Mortgage or not. There’s some really good apartments out there and there are some with very shoddy work, it’s as simple as that”.
Newer apartments were “a much safer bet”, Coyle said, though she acknowledged new builds are sold for a significantly higher price.
There were “a lot of pitfalls” in apartments built during the Celtic Tiger, whereas apartments built in more recent years had a far better level of compliance, she said.
Coyle also advised people viewing apartments to “really take a look at the communal areas” as an indicator of whether the management company for the building is proactive.
“There are some brilliant management companies that will be proactive about remediation and there are others whose promises you can’t rely on,” she said.
The banks maintain careful checks on lending in relation to potentially troublesome properties.
Bank of Ireland said where an apartment is affected by a known issue, additional information is required by the homebuyer and the bank such as the management company’s plan and time frame to “rectify the issue” and how this will be funded.
“The homebuyer would need to be aware of any likely additional cost to them for the renovations as this may be required to form part of their mortgage application,” said a spokesman for the bank.
“The progression of the mortgage is subject to the bank being satisfied the customer has sufficient affordability and the property can and will be rectified.”
While banks deal with mortgage applications on a case-by-case basis, they can reject an application – or put it on hold indefinitely – if there are any uncertainties around the property.
For the many defective apartments, the uncertainties are numerous.
Social Democrats housing spokesman Cian O’Callaghan said progress has been “painfully slow” on the Government’s remediation scheme, creating an issue of “putting lives on hold” for owners and prospective buyers.
“With cash buyers only, ownership will end up more and more in the hands of foreign investors,” he said.
“These apartments are part of our national housing stock, so the sooner we get them remediated, and the sooner they’re safer to live in, the more people can sell and buy ... But even people with the means haven’t been able to”.
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