Cuckoo fund spending on residential property hits record high
MOSTLY overseas funds have poured €3bn into property deals this year – with cuckoo funds driving the lion’s share of the action.
The private rented sector (PRS) investors – popularly dubbed cuckoo funds – are now the dominant part of the commercial property market, making up 44pc of the value of all big deals. That upends the pattern of high-end offices dominating commercial property sales, followed by retail and industrial. PRS is now a big market for commercial estate agents and developers.
About €1.32bn was spent by overseas landlords block-buying apartments in the first nine months of the year. That’s more than the cuckoo funds spent in all of last year and double the total in 2017.
The figures are from research by real estate advisors JLL tracking deals worth over €1m. It indicates that total volumes for Ireland’s investment market are close to €3bn in the first nine months of the year.
The rise of the cuckoo fund phenomenon in just a short period since the financial crash, coinciding with a surge in rent costs, has raised alarm among political leaders that ordinary prospective home buyers are being squeezed out of the ownership market and into the long-term rental sector.
Finance Minister Paschal Donohoe said he fears the prospect of a generation ageing without adequate pension provision or owning their own homes. The UN has condemned the financialisation of housing, and the Central Bank has warned the scale of external money flooding in creates new dangers of importing an overseas crisis into Ireland in the future.
But the Department of Finance has indicated it is wary of changing the tax deals available to big landlords because of the scale of building they are funding.
That inflow of international money is boosting the sector overall, according to JLL’s head of research Hannah Dwyer.
“This is unprecedented activity, with a new trend emerging for larger-sized deals in the market,” he said. “Six of the top 10 largest deals were for PRS which has helped to drive activity in the sector.”
Activity continues to be driven by larger deals, with 15 deals so far this year greater than €50m. Ms Dwyer is forecasting the value of property deals will exceed €4.5bn by the end of the year – and potentially could surpass the peak in 2014 of €4.6bn.
JLL chief executive John Moran said overseas purchasers dominate the market and are showing greatest interest in PRS and office opportunities greater than €50m that are located in Dublin.