Buy-to-let yields in Letterkenny are proving very attractive among investors with more than 10% gross return available on some properties.
Value for money in the local property market, coupled with unprecedented demand for rental accommodation, has placed the town firmly in the spotlight for property investment.
During 2016-2017, Donegal rental incomes experienced double-figure percentage increases, with Letterkenny seeing the largest share in rental price surges.
According to Daft, Q1 and Q2 of 2017 saw year-on-year increases in rental values to the tune of 11.5% and 14.1% respectively (following an 11.5% hike in Q4 2016) – among the highest rises on record in the country. And although there has been no significant increase this year (0.3 in Q1 and 1.7% in Q2, perhaps as a result of Brexit uncertainty), yields have certainly not fallen back and don’t look like doing so.
By Gareth McLarnon
Gareth McLarnon of Glen Estates.
In fact, Daft’s latest rental report which was released on August 17, states that one-bedroom apartments in Donegal offer an average yield of 10.7%. The Daft Q2 2018 report further states that two-bedroom houses offer a 9.2% rental yield with three-beds yielding 7.6%, four-beds offering 4.4% and five-beds providing a 4.6% return.
Given that a typical savings account is offering a return of just 0.01%, it seems obvious that investors will look towards buy-to-let as an attractive option.
And Letterkenny now offers some of the best buy-to-let investment opportunities in Ireland, which incidentally has topped the European buy-to-let investment league for the second year running, according to research by WorldFirst.
The study by the UK international money transfer service found the average rental yield of an Irish buy-to-let property in 2017 was 7.08pc, compared with 6.54pc in 2016. In comparison, buy-to-let investors in the UK (including our neighbours in Northern Ireland) saw yields fall from 4.91pc to 4.00pc on average, making the UK among the least attractive in Europe. This situation is turning some UK and NI investor’s attentions to Ireland, although amid Brexit uncertainty (and the weak pound), many may well be adopting a ‘wait and see’ attitude for now regarding the Donegal market.
Letterkenny is one of the regions that is pushing the Irish average rental yield up. A two-bedroom, semi-detached rental property in Letterkenny recently sold for €82,000 with a monthly rental income of €650 euro – that represents 9.45% rental yield.
This level of return may not be a typical scenario, but with three-bedroom residential properties selling regularly at just over €100,000, the returns are certainly much more attractive than many other investment options currently available.
And the current housing situation looks set to be prolonged, as demand for rental properties continues to rise in Letterkenny. A deficit in development has resulted in a critical shortage in rental accommodation, with little reprieve in sight as developers are still struggling to find finance for residential development projects following the construction crash of a decade ago.
This of course is good news for vendors but even better news for investors. There is great value still available in the local housing market and – as prices continue to improve – investors are making the most of Letterkenny housing as an attractive investment opportunity.
Capital appreciation of residential property over the past four years has been strong and we see no reason that this trend shouldn’t continue, as lending across the sector has improved with new lenders entering the market on a regular basis.
Investors are required to have a 30% deposit when seeking finance for buy-to-let property. Lending is available to investors from specialist lending institutions for up to 60% of the value of the property.
For more information on buy-to-let property locally, call Glen Estates on 074 91 02220.
www.glenestates.ie
Donegal buy-to-let tips
Do
• Realise that the investment is for the medium to long-term
• Plenty of research on the market locally
• Make sure the figures add up
• Budget for decorating to high standard
• Hire a professional letting agent
• Register on the Private Residential Tenancies Board (PRTB)
• Ensure you have a robust tenancy agreement in place
Don’t
• Purchase a property without having a professional survey completed
• Cut corners on tenancy agreements or legal documentation
• Ignore your taxation responsibilities on buy-to-let properties
• Expect an inexperienced family member to manage the property well
Gareth McLarnon is Director of Glen Estates, Donegal’s fastest growing estate agents. He has worked in the property industry in Donegal for almost 20 years. Gareth is always available for expert advice on buying, selling or renting property in Donegal. Get in touch today on +353 74 910 2220 or info@glenestates.ie
