Housing & Property

Ronald Quinlan: Government has outsourced housing crisis solution to investor

THE announcement of the Government’s intention to allocate a total of €2.3bn for housing in 2019 sounds impressive. It is, after all, an increase of €470m on the €1.83bn set aside to put roofs over people’s heads in last year’s Budget.

And if one were to simply listen to the Finance Minister’s account of the difference that money has made, rather than subject it to even the most casual form of analysis, you could be fooled into thinking the Government has the housing crisis firmly in hand.

Any reading of Paschal Donohoe’s speech, however, shows he was largely regurgitating the enervating spin of Housing Minister Eoghan Murphy.

Take, for example, the “big bang” figure of 70,000 “housing solutions” Mr Donohoe claimed to have been delivered under the Rebuilding Ireland plan since 2016.

With his next breath, he revealed “just under 12,000” of those 70,000 solutions have come as a result of new buildings. Put simply, the Government has failed miserably to increase the supply of homes, and is instead deliberately choosing to outsource the responsibility for housing present and future generations to the private sector.

Arguably, the most important statement of intent in this regard was Mr Donohoe’s decision not to increase the rate of stamp duty on the purchase of apartment blocks by institutional investors from its current level of 2pc to 6pc.

The prospect of such a hike had been speculated on within the property industry both here and overseas in recent weeks. But the Finance Minister’s laissez-faire approach has sent a clear welcome message to the estimated €5bn in international capital that commercial real estate agent CBRE estimates is targeting Ireland’s build-to-rent market.

The appetite of institutional investors for our fast-growing private rented sector (PRS) was firmly proved in CBRE’s latest residential investment report.

According to it, more than €500m of overseas money was spent acquiring whole apartment blocks and other residential units in the first six months of this year – more than double the annual average spent since 2012.

Now, I fully accept those looking for a home to buy or rent may not be entirely engaged with the detail of Ireland’s burgeoning private rented sector, so I’ll try to put it into some perspective.

Only last May, potential purchasers of homes at Park Developments’ Fernbank scheme in Churchtown, Dublin 14, were left disappointed when Irish Life Investment Managers snapped up all 262 of its apartments for €120m.

The deal proceeded, notwithstanding the fact that, prior to it, some 1,000 people had expressed their interest in buying homes at the scheme.

Other major investments included Carysfort Capital’s €101m purchase of 120 flats and two retail units at 6 Hanover Quay in the Dublin Docklands, and Ires Reit’s €40m acquisition of 128 apartments at Hampton Wood in Finglas.

While all three deals may have been welcomed by the property sector, this view will not be shared by individual home buyers unable to compete with large-scale institutional investors.