Growth in institutional investment in the Irish residential market continued its upward trajectory in 2019, with turnover reaching a record €2.54bn across 51 deals. This equates to more than double the level of activity achieved in 2018, according to latest research from Sherry FitzGerald and Cushman & Wakefield Research.
Commenting on the market, Patrick Hogan, Head of PRS at Cushman & Wakefield Ireland said; “Demand for PRS product remains robust, underpinned by strong structural drivers together with a continued mismatch between supply and demand in the residential sector. However, market confidence and growth are reliant on political stability and confirmation around any potential policy changes. Investors need certainty, and quickly.”
Since 2011, over €5bn of capital has now been invested in the residential sector in Ireland. Capital flows have increased significantly in recent years, heightened by a significant rise in forward commit transactions, which have become a key feature of the Irish PRS market. In the past twelve months, forward commits accounted for approx. €1.3bn or 51% of activity in 2019, up from €531m in 2018. These sales comprise almost 2,850 dwelling units, which arguably would not otherwise be built, highlighting the vital role that the private rented sector can play in the supply of units to the rental market.
To date, PRS activity has been largely focused on Dublin. Approximately 90% of the 2019 spend took place in Dublin, with activity outside the capital largely focused on the Greater Dublin Area and Cork. This highlights the limited viability of the PRS market outside large unit centres.
2019 turnover was boosted by several large-scale transactions, which saw the average size deal increase to almost €50m, up 23% year on year. In total, there were eight transactions above €100m in 2019 with the largest single deal being Project XVI at €285m. Acquired by IRES REIT from Marathon, the portfolio comprises 815 properties primarily located in Dublin, with one lot of apartments situated in Harty’s Quay, Cork.
Other notable transactions included the acquisition of Project Vert by Avestus Capital Partners for €216.1m and Dublin Landings by Greystar from Ballymore International Developments Limited and Oxley Holdings Limited for €175.5m.
Ross Harris, Head of Residential Investments, Sherry FitzGerald New Homes further added: “2019 saw prime headline yields compress to 3.75%. Further compression, particularly for “super prime” product, is expected in 2020. This hardening of yields could result in a broadening of demand in other GDA locations as well as cities outside of Dublin, as investors seek higher yielding assets.”
Average rents continue to trend upwards, albeit at a slower pace than in recent years. The most up to date statistics from the RTB show annual rental growth of 6.7% in Q3 2019, compared to 9.6% for the comparable period in 2018. Looking forward, it is challenging to provide an outlook for rental figures given the uncertainty on policy and the formation of the next Government. However, at this juncture rental inflation is expected to slow further in the short term. Anecdotal evidence would suggest a pull back on asking levels at the upper end of the market and this should reduce the pace of inflation in the coming years.
Finally, as the market continues to mature in 2020, new entrants are anticipated. Forward commits are expected to act as the route for such new investors, while also being a key driver of activity for investors seeking to acquire at scale. These transactions will lead to the delivery of further rental units to a market starved of stock. However, political and policy certainty is needed to avoid impacting existing and potential investors’ confidence.
| For Further Information Contact: | Media Contact: |
| Patrick Hogan Head of PRS | Director Tel: +353 1 639 9329 patrick.hogan@cushwake.com | Jill O’Neill Communications Director Tel: +353 86 252 3277 research@cushwake.ie |
Ross Harris
Head of Residential Investments | Director
Tel: +353 1 237 6439
ross.harris@sherryfitz.ie
