Prospective home purchasers are losing out to cash buyers – mostly overseas investors – on apartments with defects, ranging from minor issues to hazardous faults, because banks will not risk lending to buy them.
An investigation by The Irish Times has found that mortgage-approved buyers are unable to buy second-hand apartments that require remediation works – in some cases as simple as replacing out-of-date fire alarms – as banks are unwilling to lend on them due to uncertainty around a Government scheme to fix them.
Estate agents have said apartments built between 1991 and 2013 found not to be compliant with fire regulations or identified as having defects are being sold exclusively to cash buyers who have factored in potential future remediation costs, and can buy the apartments at reduced prices due to fewer buyers.
Once remediated, the number of apartments potentially available to buyers could run well into the thousands given that applications have been made for more than 17,000 apartments under the scheme.
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Richard Todd, associate director at Leonard Wilson Keenan, said that many mortgage-approved first-time buyers whose budgets only extend to apartment purchases were being “locked out completely” from buying due to bank concerns.
Banks are unwilling to lend regardless of whether the issues with the apartments are minor or significant, he said.
“It doesn’t matter because once anything at all gets flagged under fire and safety, it just becomes a nightmare,” said Mr Todd.
The Government has promised to introduce a €2.5 billion remediation scheme to fix up to 100,000 defective Celtic Tiger-era apartment blocks but it is not expected to become operational until next year.
In the meantime, defective apartments are being snapped up as overseas investors pay cash for the properties for the rental income or to own for several years to provide accommodation for their children attending Irish universities.
Attempting to sell affected apartments to “anyone who isn’t a cash buyer is a waste of time”, said David Brock, director of Brock Delappe estate agents. “They’re only being bought by cash buyers, and any cash buyer really is an investor. Mortgage [buyers] are locked out,” he said.
Estate agent Bridget-Anne Doran, director of Doran Estates, said that prices were dropping in apartment blocks affected by defects or fire safety issues despite interest in them.
“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 said.
Ms Doran said she had seen many apartments going on the market with defects.
“When you hear a word like ‘defect’ you think something terrifying, but a lot of them have very minor issues, like fire alarms no longer in date. But you still can’t get a fire cert, so the bank can’t loan to you,” she said.
Surveyor Cathrina Coyle, of CC and Associates, warned any potential buyers of apartments with defects “not to buy until they’re remediated”.
“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,” she said.
Bank of Ireland said that where an apartment has a known issue, additional information would be required by the homebuyer and bank such as an action plan by the apartment block’s management company, time frame and funding to fix the issue.
AIB and Permanent TSB said that it assesses mortgage applications on apartments “on a case-by-case basis”.
Social Democrats housing spokesman Cian O’Callaghan said progress has been “painfully slow” on the Government’s remediation scheme, saying it is “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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