The private rented sector dominated international investor activity in Dublin – accounting for 55 percent of all property transactions during the second quarter of 2019.
According to the newest report released by real estate agent Hooke & MacDonald, four of the five largest real estate investment transactions in the three-month period from April to June were in the private rented sector (PRS). This marks the first time PRS surpassed the office sector which has led property investment for several years.
Large Transactions in Irish PRS
A total of eight PRS deals involving big blocks of apartments accounted for €615 million in turnover. Interestingly, only one of these transactions was a new-build portfolio – the sale of 214 apartments at the Fairway, Cualanor, Dún Laoghaire by Cosgrave Group to a fund managed by DWS, a subsidiary of Deutsche Bank, valued at €108 million.
Two of the largest transactions of existing stocks of apartments included a €150 million investment by LRC Group – a European real estate investor – in 600 residential and commercial units from Targeted Investment Opportunities, an Oaktree affiliate.
In the second deal, Ires Reit – the state’s largest private landlord – purchased 815 homes distributed across 16 high-end developments at a price of €285 million from Marathon Asset Management. This transaction represents the largest single property sale this year. The portfolio included 588 apartments Marathon originally purchased from Nama in 2015 for €120 million in a loan sale process referred to as Project Plum by the State’s toxic debt agency.
In total, Hooke & MacDonald reported that €703 million in sales were conducted across 12 transactions in the private rented sector representing 40 percent of property investments during the first half of the year. Office retail accounted for 35 percent of investment property sales and retail sectors amounted to 11 percent respectively.
Overseas buyers were the biggest players investing in the Irish private rented sector, accounting for almost 60% of the funds spent. According to the Lisney agency’s recent research findings, a total of €1.83 billion was spent in the first half of the year on investment property. Total spending of €1.22 billion in the second quarter equaled more than double the transactions completed in the first three months of 2019.
New supply valued at €1.2 billion came into the market during the quarter over 56 investment opportunities. At the end of June, €1.33 billion worth of supply was available to purchase. Concerning upcoming sales activity, reports indicated that 18 transactions with a combined value of €516 million are currently in progress in Dublin.
Hooke & MacDonald noted that the increase in the number of planning applications and approvals has not necessarily led to an equivalent increase in the commencement of developments. The report attributes this to the cost of land and financing, planning delays, and taxes and levies on new construction.
Institutional Investor vs. Owner-Occupier
There has been a growing conversation in Ireland centered on the private rented sector and institutional landlords preventing individual homeowners the opportunity to purchase apartments. On this point, the report indicated, “The existence of institutional investors who wish to acquire large-scale blocks and will pay the required viable prices is facilitating the supply of apartments that would not otherwise have been constructed. Most of the developments would not have been built were it not for the presence of institutional investors.”
They argue that the cost of apartment construction in Dublin has increased to the point where the owner-occupier and first-time buyer’s market can’t support the returns required to make projects viable.