Interested in buying an apartment? For many single people, couples, small families and downsizers, an apartment can be a good choice. But how can you buy the right one?
The State is stumping up €2.5 billion under its Interim Remediation Scheme for Fire Safety Defects to repair 100,000 defective apartments and duplexes built during the Celtic Tiger. So how can buyers avoid a dud, and in a rush to build new apartments, is there a risk of repeating past mistakes?
Many apartment owners who bought in the Celtic Tiger era have faced serious challenges. Fire-safety and water-ingress issues have been identified in some apartment buildings poorly constructed during that period. It’s estimated that up to 100,000 apartments built between 1991 and 2013 are defective, with up to 90,000 affected by fire safety issues. Owners have been saddled with funding repairs, as well as living with safety concerns.
The full roll-out of a €2.5-billion scheme to fix defective buildings could take up to 10 years, the Government says. A fully funded interim fire safety measures scheme from the Housing Agency is now open for applications from owners’ management companies (OMCs). This will upgrade fire alarms and make escape routes safe until full remediation is provided for defective apartment developments.
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It’s a significant step in sorting the issues affecting apartments, according to owners’ lobby group the Construction Defects Alliance.
Campaigning on these issues and tackling repairs has underscored how owners in multi-unit development (MUD) schemes are bound together. When you buy an apartment, you are buying both the apartment and a share of the ownership of the common areas. Owners automatically become a member of the OMC, a legal structure comprising all owners in the development, designed to protect their interests. You elect directors from among yourselves and employ a property management company to look after bin collections, repairs, cleaning, insurance and keeping accounts.
Apartment owners pay an annual service charge towards this.
How to buy
Those buying apartments now include first-time buyers or parents buying for children. Some second-hand apartments present great value compared to renting. With landlords exiting and new landlords turned off by rent caps, buyers face less competition.
Buyers of second-hand apartments are “cautious” but informed, says estate agent Owen Reilly.
Asking the right questions before signing a contract is key to uncovering any issues, he says. An MUD requisition, sought by a buyer’s solicitor, should tell them what they need to know, says Reilly.
“It includes things like the sinking fund, who the auditor is but also any known defects. Has there been a fire audit, is there a fire cert in place? Once those answers are submitted, there can be another list of questions from the buyer’s solicitor,” he says.
“Uncertainty kills the deal more than anything else. Where a management company is aware of the issues and how they are going to deal with them, that’s much better,” says Reilly.
“Roofs will need work, lifts will need to be replaced – a new lift is €75,000, so how have they planned for this? Some have planned very well and have a healthy sinking fund. If you buy an apartment that has done upgrading works, you really get to benefit from that.”
Opting for one apartment over another for a lower annual management charge can be a false economy. Too low a fee can spell trouble.
“The key question for me is, has a building investment fund report been done?” says Kevin Hollingsworth, president of the Society of Chartered Surveyors Ireland (SCSI). The report is used by OMCs to cost the maintenance of a building’s depreciating assets over time – such as roofs and windows.
“If you go into a development that has a slate roof, brickwork elevation, UPVC windows and it’s low rise with no lifts, that building has low-cost, long-life elements and that is going to be less expensive to run,” says Hollingsworth.
Those buying with a mortgage will need a surveyor’s report, just as those who bought in the Celtic Tiger era did. A surveyor’s ability to inspect the roof or services, however, may be limited, says Hollingsworth.
“The savvy surveyor should be pointing out to the purchaser that they should ask if a building investment fund report has been done, has a fire safety audit been undertaken and has it been implemented,” he says.
“If the surveyor says the cost of maintaining the building is €1,000 per apartment per annum, for example, but the owners agree €500, this leaves a funding gap if the lifts and fire alarms fail at the same time,” he says.
A buyer, their solicitor and surveyor must carefully interrogate the property management company to satisfy themselves that any defects have been identified and addressed and that there is a sufficient sinking fund for maintenance.
Benefits of older apartments
There are about 1,300 new and second-hand apartments for sale right now, according to MyHome.ie. About two-thirds of them are in Dublin. For those single, child-free or planning a smaller brood, being close to the buzz of the city may trump extra rooms in the commuter counties. An apartment can be more affordable, too. Once defects are ruled out, there are some upsides to the older ones.
“The older developments tend to be in more established neighbourhoods and they tend to be smaller developments,” says Owen Reilly. Those built 20 years ago will have more generous grounds. More recent developments have a much higher density of units and far less communal space. Some older schemes close to the city can have as few as 60 units while newer ones have up to 300.
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Older apartments also tend to be larger and some can have lower management fees, he says. They can come with an assigned parking space with plenty of overflow parking for visitors too.
“In build-to-rent apartments in the city centre now, you tend to have no parking. In the suburbs, you’ll get a space, but you’ll only get one, so that would be an advantage the older apartments would have,” says Reilly.
A downside of older apartments is that they are less energy efficient than new builds, though apartment owners are availing of Sustainable Energy Authority of Ireland (SEAI) grants to improve energy efficiency.
Buying new
Following a post-crash nadir, new apartment building has risen sharply since 2019. The number of apartments built as a percentage of new-home completions went from 16.4 per cent in 2019 to 35.6 per cent in 2023, according to Central Statistics Office (CSO) figures. Most of them are in Dublin – there were 9,081 apartments built there last year. Indeed, of all housing built in Dublin, about 72 per cent were apartments.
With taxpayers facing a bill for boom years defects in apartment and housing schemes, surely we can’t make the same mistakes again? The SCSI, however is raising a red flag.
“While a lot of the focus of late has been on legacy defects, new issues will continue to arise if building regulations are not continually enforced,” says Hollingsworth.
An assigned certifier is now required to manage and certify construction works. This improves standards and provides a trail of certification and accountability, says Hollingsworth. There needs to be more inspection by local authorities, however.
“We are calling for an increase in funding to the local authorities so building control officers can do more inspections, because they are the ultimate authority, above the contractors and assigned certifiers,” he says.
Builders these days are trying to construct better, more cost-efficient homes using modern methods of construction (MMC). This enables fabrication to take place off site at the same time that ground works are progressing on site, meaning faster build times.
“Our members have identified some serious quality control issues with regard to some MMC products, including timber not being protected from the weather when it arrives on site and mould growing on bathroom pods,” says Hollingsworth.
“Unless these supply chain shortcomings are addressed now, these, and other issues are going to become systemic problems in the next decade.”
Drop off
Apartments are expensive to build. The average cost of delivering a new apartment in Dublin in 2022 was €496,000, according to a Department of Finance report. The cost of building a three-bed semidetached house was €359,000.
Much apartment building in recent years has been by developers involved in the delivery of units for the private residential sector (PRS) market. These apartment blocks, with dedicated amenities such as concierge services and gyms, are owned in many cases by pension funds and other institutional investors, and rented at a premium.
The PRS sector had been responsible for 5,000 new homes per year, mostly apartments, in Dublin in 2022 and 2023, according to analysis by property agents Savills.
A combination of higher interest rates and construction cost inflation, however, has served to dampen demand from big investors for more. Apartment completions in the first three months of this year stood at 1,603, down 32.6 per cent on 2023.
“With rising construction costs and interest rates, you are actually going to see less build-to-rent over the next couple of years than we would need or like,” says Reilly. “That’s a pity, because there was evidence that as this supply was coming on, rents were starting to stop going up.”
A drop in the supply of new apartments for purchase or rent may drive more buyers towards second-hand units. You can buy some two-bed second-hand apartments within walking distance of Dublin city centre for about €260,000. That’s about €200,000 less than the estimated cost of building a new one.
What’s for sale?
Take for example apartment 5 Goldstone Court, a two-bed within walking distance of the city’s restaurants, bars and cultural institutions. It’s currently for sale asking €295,000. A first-time buyer couple on the average wage borrowing €265,000 over 30 years would have mortgage repayments of around €1,220 a month, whereas those renting a two-bedroom apartment in the same area can pay up to €2,000.
For another example, Brickfield Square, a new build-to-rent apartment scheme about a kilometre further out, off the Crumlin Road, is advertising a two-bed, two-bath apartment for €2,850. It has a concierge and on-site gym and meeting rooms, but for those who don’t need the bells and whistles, buying a second-hand apartment can make more sense.
Go further out and you’ll find a new and a second-hand one-bed apartment for sale in Donabate. A second-hand one-bed in the small development of Beaverton Court is asking €240,000. For €55,000 more, you’ll find an A-rated one-bed for sale at the new Balmoston development.
