Property investors who previously bought with cash are now expanding their portfolios using mortgage debt, according to property consultants, Savills Ireland.

In a report on the Irish residential market, published this morning, Savills notes that, while most investment properties are still being bought outright, the proportion of investor purchases that are entirely cash-financed has been falling steadily for the last 15 months. Instead, mortgage finance is increasingly being used and investors were the buyer group which saw the biggest increase in mortgage drawdowns during 2015 (9%).

John McCartney, Director of Research at Savills Ireland commented;

“Easy access to credit created a generation of highly geared investors in the first half of the 2000s. Following the bust, however, buy-to-let mortgages became harder to get. Consequently investors reverted to a more traditional cash financed model in recent years. However, in the last 15 months we have begun to see investors leveraging the equity in their existing properties to expand their portfolios and drive returns by financing or refinancing with modest levels of mortgage debt. This indicates both investors’ appetite for gearing and banks’ increasing willingness to provide buy-to-let finance for borrowers who have modest overall loan-to-value ratios.”

The report notes that investors generally favour properties in central locations and strong rental areas close to third level institutions and transport links. Graham Murray, Director of Residential at Savills Ireland commented;

“Savills generally advises its income focused clients to target centrally located 1 bed apartments which tend to generate higher rents relative to the capital cost of acquisition. In addition, with fewer people sharing there is less wear and tear.”

Looking ahead, Savills expects to see cash investors – who are less encumbered by affordability constraints – remaining active in the Dublin market. However, with buy-to-let mortgages becoming more readily available, the number of investors gearing-up with modest levels of debt is set to continue.

The full report can be viewed here: http://bit.ly/1q3mjpX