Speculators warned against flipping for short-term profit
The warning came from Prestige Group executive chairman Paul Coghlan, whose company has facilitated the placement of €2.5 billion in property investments since its foundation in 1997.
Flipping involves speculators who buy properties off the plans and quickly sell the investments before construction is completed, usually at a significant profit in a rising market.
But Mr Coghlan said the practice was not encouraged by his company and carried serious risks. An unexpected change in market conditions could prevent the resale of the properties and leave the speculators seriously exposed.
“Running a proprietary company, I don’t agree with it.
“If we were to encourage clients like this, we would be basically underwriting a bet.” He warned that property was not a one-way bet all the time, adding that investors can’t treat property as a liquid asset like a share. “It’s a medium to long-term investment,” he said.
The Spanish market was presented as a relevant example of flipping. Because the market had slowed there, speculators who took positions are in danger of losing their deposits, which in some cases were as high as 50% of the purchase price. Ironically, he said there were good deals to be had in Spain at present as speculators under stress are desperately covering their positions.
“They are happy to cover their deposits and are not even thinking about a profit,” he said.
Mr Coghlan was speaking at a business breakfast briefing in Cork organised by Dineen Financial.
He also warned investors not to over borrow or under-borrow for property investments. The associated risks of borrowing up to 90% “because you can” was not a wise practice, he said. A slight shift in yields could result in a struggle to service debt.
Conversely, borrowing too little could result in a failure to capitalise on an investment’s full potential, he said. He believed a gearing level of about 60% was appropriate.
Fashionable investments were also a risky proposition, he said. Just because everybody else is buying in Spain is no good reason to invest your money on a costa, he said.
Mr Coghlan said his company offered good medium to long-term investments in Ireland, Britain, mainland Europe, New Zealand, South Africa and the United States.
Before the company invests in a project or country, he said it spends significant time and money determining investment potential. And he stressed that the company always invests its own money side-by-side with its client investors.
Prestige Group employs 48 people and has offices in Dublin, Galway and Kilkenny. It recently opened a new office in Cork’s Lapp’s Quay.






