Why State hinders buyers more than the vulture funds
HOME buyers may find themselves pushed out of the market by investment funds who buy up estates or apartment blocks that they rent out for enormous sums – sometimes way more than a buyer would pay in monthly mortgage repayments had they been able to buy the same property.
But those funds don’t provide the main competition to the private buyer – it’s the State that does that.
All around the country, new housing estates are being built, but instead of being available to locals to buy they get purchased either by the local council or approved housing bodies with finance provided by the State.
About one-third of all new houses built in Ireland are purchased this way each year, and yet all the attention gets focused on the activities of investment funds.
It is estimated by Government that less than 1% of new homes purchased since 2021 – after the introduction of new 10% stamp duties to act as a disincentive – have been bulk-purchased by investment funds. This may be a generous estimate but it is not too far off the mark.
The latest controversy – seized upon by Sinn Féin – has been caused by the revelation that a division of Deutsche Bank’s investment arm bought 85% of the available houses at a development at Belcamp Manor in north Dublin, which are now being advertised to rent at €3,175 per month.
This is not to defend such extortionate rents but the reality is that they will be high when supply is short.
It also should be noted that these houses were completed and offered for sale more than six months ago but were too expensive – allowing the vulture to swoop in and buy in one block at a discount which covered the stamp duty.
Unfortunately the reality is that land-use requirements dictate that most of the home building in Dublin and other cities will be of apartments.
These are more expensive, partly because, while an estate of houses can be completed and sold in phases, an apartment can only be lived in when the entire development is completed.
The costs involved in meeting regulations, and increased material costs, also mean most apartments are too expensive for people to buy, or for many individuals to own and rent.
So if we don’t have the institutions pre-funding construction, or buying what is already started or nearly finished, the apartment blocks may not get built at all, and houses will not be built as a replacement.
We value foreign capital for creating jobs but Government critics don’t want foreign money to finance accommodation for rent.
This is all fine and good, but there is a point beyond which the Government cannot afford to finance or subsidise all of the non-one-off construction in the country.
Demanding and agreeing to increase stamp duty on transactions for bulk buying may dissuade institutions, but it is more likely to benefit the State as buyer rather than individuals in the private sector.