Ken MacDonald
National and local government interference undermining efforts to deliver more housing
The multi-family/private rented sector (PRS) market is now the most active property investment class in Ireland. It has grown steadily since 2016 and in that period, with financing of more than €7 billion from Irish and international funders and investors, it is facilitating the construction of more than 12,000 new homes, which when fully completed will provide accommodation for more than 25,000 people.
From a capital markets point of view, internationally we are seeing many investors re-allocating funds from offices and retail to the ‘living sector’ (including multi-family), logistics and life sciences, with an active focus on properties with strong sustainability and environmental, social and governance (ESG) credentials.
With the right conditions, housing supply in Ireland is well placed to benefit from this as the market continues to mature, underpinned by sound economic fundamentals, a rising population, low vacancy rates, positive portfolio performances and a need for new homes. However, a word of caution, ongoing national and local government interference is seriously damaging Ireland’s desirability as a place to do business – this includes the recent statement from the Central Bank on potentially restricting loan to values for property investors and also two Dublin local authorities making adjustments to planning guidelines, each of which, along with other recent changes, are seriously undermining Ireland’s ability to scale up housing.
The multi-family/private rented investment sector in Dublin continued to consolidate throughout 2021. Investor interest and demand for good properties remained strong. A number of major transactions have been signed or closed.
While most of the transactions in the market are forward sales, there are opportunities emerging for forward funding. Dublin will remain the main focus for transactions in the year ahead. More than 85 per cent of the multi-family developments in Dublin are taking place in the suburbs rather than the city centre. The conditions are right for increased activity in the wider counties of the Greater Dublin Area; and also, Galway, Cork and Limerick cities on suitable sites in prime locations, subject to viability issues being addressed.
Housing supply
The Government’s Housing for All programme can only be successful if Irish and international funders and investors are encouraged to play their part in funding housing supply in both the public and private sectors. By supplying accommodation at the middle and upper ends of the market, it is freeing up space at the lower end. However, there are significant challenges facing the sector as a result of building costs increases and planning issues.
There were more than 4,000 multi-family properties sold in Dublin in 2021 across 27 main transactions of more than €2 billion; approximately 90 per cent of these were new build properties and 10 per cent were existing stock. The largest sale was the Ardstone transaction involving multiple developments in the Greater Dublin Area worth a reported €450 million for approximately 900 properties.
The largest transaction in a single location was the first major Irish residential forward funded sale of 435 apartments at 8th Lock, Royal Canal Park, Dublin 15 for €200 million, which is being developed by Ballymore Group and forward funded by Union Investment.
Cairn PLC achieved €237 million in two significant transactions, selling Griffith Wood (342 apartments), Griffith Avenue, Dublin 9 to Greystar for €176.5 million and Rostrevor Place (107 apartments), Rathgar, Dublin 6 to Hines European Core Fund for more than €60 million. Similar to the Ballymore transaction with Union Investment, the Cairn transactions further emphasise the attraction of the Irish residential investment proposition to global institutional markets.
Park Developments also completed another large forward sale in the year – 297 apartments at East Village, Clay Farm, Dublin 18 for €127 million to Blackrock/SW3 Capital. We continue to see new capital coming to the Irish market – the challenge will be having enough established developers, contractors, and labour to deliver adequate future stock. Yields are likely to trend downwards in the medium term as demand remains resilient, particularly for well-serviced locations and good delivery partners.
In terms of overall Dublin investment transactions, multi-family properties led the way with a likely end of year market share of more than 50 per cent, followed closely by offices. There are likely to be a number of significant sales announced in early 2022 which are currently under negotiation.
Article originally published in The Irish Times, Dec 8 2021.
