Holiday home dreams have turned to nightmares for many – is there anything second homeowners can do?
WHEN your dream holiday home turns into a financial millstone, it can seem like there’s no way out. You can’t rent it, you can’t sell it, you’re under pressure to meet mortgage repayments and it’s proving a massive drain on already limited resources.
Cormac Ó Súilleabháin bought his rural idyll, a stone cottage in Keeldrin, Carrigallen in Leitrim, close to where he grew up, in 2005, for €165,000 and spent another €25,000 renovating it.
“There were three people bidding at the time. A lot was happening, so much was bought and sold and the credit was available, so we thought why not?” With the frenzied days of the boom a distant memory, his circumstances have changed and he can no longer afford to keep the property.
He lives in Athlone and is now working a three-day week and while his wife still works full time in the public sector, their combined income is down “the guts of €2,000 a month after tax deductions and levies”, and they now have two children, aged eight and four, to support.
The cottage, which has three bedrooms and outbuildings and is close to scenic Lake Garadice, has been on the market for 18 months despite a price reduction from €160,000 to €139,000 through Ballinamore auctioneer Gordon Hughes.
Cormac says there are too many properties vying for a handful of tourists. “In Leitrim, there are tax incentive properties all over the place. In Newtowngore, the nearest village, which has one pub and one shop, there are several housing estates. You can now buy a four-bedroom distressed property in Ballinamore or Carrigallen for under €100,000.”
His buy-to-let mortgage repayments have risen substantially as a result of the recent interest rate rise but he is optimistic that it will eventually find a buyer because it stands out among the sea of nearby newbuilds.
Frank Conway, of the Irish Mortgage Corporation, says the current situation regarding non-primary- residence properties is “a real mess”. Quite a few investment properties were funded by interest-only mortgages for five years and many of those loans are now coming to the end of their interest-only period and “lenders are looking for their money”.
He says while the Code of Conduct on Mortgage Arrears offers protection on a person’s main residence, this is not the case with holiday homes and investment properties, “so, there is a growing pressure from the lenders to get their money back”. However, offering some comfort to holiday homeowners in a predicament, Conway says that despite this pressure, there is no hard evidence that they have taken the route of foreclosure en masse. “Many are insisting on full or maximum repayment but lenders are also not in the the business of property management, at least not yet.”
In Leitrim, the county with the highest proportion of empty homes (30 per cent), according to CSO figures, auctioneer Gordon Hughes says some holiday homeowners are now looking for long-term tenants, because of slim pickings in the short-term let market. For some, saddled with big mortgages on second homes, monthly rents, at around €400 per month for long-term tenancies, are a drop in the ocean in terms of what they owe.
Ed Carey, chairman of the Society of Chartered Surveyor’s Residential Professional Group, says his advice to someone in this situation would be to keep a dialogue open with the banks and, more importantly, to keep accurate records of every communication. “It depends on how the loan for the property was secured. You are in more trouble if the property was purchased with a top-up loan on your principal home and is parcelled up in the one mortgage. I would say that the banks are overrun and finding it hard to cope with arrears on holiday home mortgages. I think it’s time they exercised more debt forgiveness or, to use a better phrase, negotiated settlement, which would start to free up the market.
“Anecdotally, different banks are taking a different approach. Some are working with the client and accepting half-decent offers for a holiday home property to settle a debt while others are showing no willingness to do any kind of deal.” He advises that anyone with a holiday home lying idle should ensure it doesn’t fall into disrepair and should consider renting it at any price to keep some income coming in.
Adrian Haythornthwaite, from Sherry FitzGerald Haythornthwaite in Wexford, insists that despite the statistics, things are not as bad as they seem. “Around 180 to 200 homes have been sold across Co Wexford by different agents since the start of the year and a significant number were holiday homes,” he says. Whether a property will sell or not hugely depends on location. “You can now buy a fantastic house on Rosslare Strand for €250,000, so why go inland?” He says the majority of purchasers are cash buyers who are not dependent on rental return. “I don’t think rents were ever that stable anyway.”
Pauline Sugrue, an auctioneer based in Cahirciveen, Co Kerry, sells coastal property in scenic spots, including Waterville, Ballinskelligs and Valentia, and says it’s a difficult market. “People who want to buy can’t get the money and people who can buy are not buying into new developments. They are looking for one-off houses and only ones that are a real bargain.” She says those selling their holiday homes are doing so for a mixture of reasons. “The price of oil is going up, there’s property tax, and water charges are imminent.”
The market is dependent on a trickle of English and continental buyers. “They want scenic, coastal, mature and remote.” The few Irish buyers around might go for a development “if it’s a nice one, but they might be scared off by management fees and the prospect of those going up”.
