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Collapse in Ireland is Good News for Retirees

Kathleen Peddicord
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The Irish economy, banking industry, and property market have collapsed. The Irish construction industry, once responsible for feeding the Celtic Tiger, is all but insolvent. Real estate across the country is on offer for as little as 50 percent or less than what it sold for pre-2008, and prices continue to go down. The market isn't stable enough to accept all the foreclosed real estate on the books, so the government and banks are holding many properties to the side, especially in small markets where the number of foreclosures as a percentage of the market overall could be crushing.

One of the biggest challenges facing both buyers and sellers considering an Irish property is that prices are all over the place. The Irish have been so far removed from reality this past decade-and-a-half that they have no idea what any piece of property is worth. The post-Celtic Tiger Irish property market is more Latin American than European. In a market like this one, you can't pay any attention to list prices, and you shouldn't be afraid to offer half what's being asked. Again, no one has any idea what any piece of property is "worth" in Ireland today, meaning it's worth what a ready seller is willing to pay.

Is it time to buy? If you've ever dreamt of a home of your own on the Emerald Isle, I'd say that right now could be the best time in your lifetime to go shopping for it.

When you do, hold any investor agenda to the side. Don't expect any capital appreciation in the next five years at least. Property values in this country may not even rebound over the coming decade. However, for retirees, that isn't the point and shouldn't interfere with realizing your dream of owning your own piece of the Auld Sod. Ireland holds out the promise of a peaceful, tranquil retirement amidst landscapes and seascapes that qualify as among the world's most glorious.

Ireland has long been a top retirement choice. It's a beautiful, welcoming, peaceful nation of friendly, hospitable folks who speak English and have a long-standing affinity with the U.S. For decades, the retirement daydream of many Americans has been a white-washed, thatched-roof cottage on the Emerald Isle. In the course of but two decades, Ireland has seen unprecedented boom and dramatic bust. But through the wild up and down, she has retained her heart. Irish retirement living is as appealing and charming an idea as it ever was, and today it's also affordable.

One good way to access some of this country's best current bargains is at an auction. Ireland is one place where property continues to trade hands at auction, and, in this post-Celtic Tiger climate, banks are using auctions as a way to clear foreclosed inventory from their books. Focus on offerings in the main cities of Dublin, Galway, and Cork. Some of the smaller cities, such as Wexford and Waterford, might offer opportunities that make sense, but unless you personally want to be based in one of those small towns, you are better off sticking with higher population areas.

Also note that Ireland is contemplating a property tax. This is not surprising given the state of things on the island. Ireland is under pressure from the EU and the IMF (who have contributed heavily to try to keep the island afloat). Of course, it's not only the Irish government that's in trouble, but the Irish people, too. But even the modest property tax that's being discussed is seeing heavy resistance.

Historically, Ireland has imposed no property tax on residential property. Instead, they have charged a hefty "stamp duty" (transfer tax) on the buyer on every property purchase. The Irish government got its money up front. The stamp duty percentage is currently 1 percent for properties changing hands for less than 1 million euro and 2 percent on property sales over that threshold. Before December 2010, Ireland's stamp duty was a complicated and often changing tiered system, with the top rate as high as 9 percent.

As a property buyer in Ireland years ago, I was able to justify the high stamp duty by reminding myself that it was a trade-off for a property tax. I amortized the amount of the stamp duty over the expected holding period for the property. Now the stamp duty has been simplified and reduced and, it seems, a property tax is to follow. I think investors could come out better in the long run. The important thing to remember, though, is to factor in the stamp duty when processing the figures for any purchase.

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter. Her book, How To Retire Overseas--Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.

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