According to a major new report by international property consultants Savills Ireland, over €1.1bn was spent by corporate investors on multi-unit residential schemes in 2018 – accounting for 29.6% of last year’s total property investment.
Nearly five times more units were block-purchased in 2018 compared with 2017, with 2,923 units bought. Dublin has always been the focus of investor interest, but increased development activity has led to an even greater concentration on the capital - 81% of the units purchased last year were in Dublin.
Dr. John McCartney, Director of Research at Savills said that there continues to be very strong investor appetite for residential assets in Dublin, driven by market fundamentals;
“Rising house prices and tight mortgage lending have driven a big shift from owner-occupation to private renting. The number of households renting in Dublin rose by 10.8% last year, and nearly 27% of all households are now in the private rented sector. This has led to strong rents and negligible vacancy – factors which are obviously attractive to investors.”
Looking ahead, McCartney said new residential supply is now coming onstream but the residential market is likely to remain under-supplied until at least 2022, and this should ensure continued investor appetite for well-located residential investments.
Savills’ report notes that an increased number of residential investment deals are now happening before the units are built. The majority are entering forward-purchase arrangements with developers to buy rental blocks once they are completed.
Fergus O’Farrell, Director of Investments at Savills, notes that in addition to providing a more professionally managed rental stock, the increased activity of institutional investors in the market has been beneficial as it is helping to accelerate the much-needed supply of accommodation;
“Forward purchase contracts de-risk a scheme, enabling developers that might otherwise be unable to obtain funding to get finance and proceed with their developments. Likewise a block sale allows residential developers to recycle their capital, further accelerating supply.”
The full report is available to read here