Tuesday 24 January 2017

Cash-buying to remain a feature of the property market

Karl Deeter

Published 07/04/2015 | 02:30

Cash deals have consistently accounted for more than half of all Ireland’s housing sales since the start of 2013
Cash deals have consistently accounted for more than half of all Ireland’s housing sales since the start of 2013

Property cycles are nothing new. However, every cycle is different and one peculiarity of the current upswing is that housing demand is unusually reliant on cash.

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Five years ago the proportion of home purchases that were entirely cash funded lay in low single digits. However, cash deals have consistently accounted for more than half of all Ireland's housing sales since the start of 2013. There are three main groups of cash buyers. On one hand there are the institutional buyers of 'multi-family' residential blocks. These corporates have bought-up almost 4,300 properties in Dublin over the last three years - 13pc of all residential sales. Families moving within the market - traders up and down - have also been cash buyers. Finally, small-scale residential investors accounted for half of cash sales last year, and 93pc of them are entirely cash-funded.

While cash helped to kick-start the market after a deep crisis, there are questions about whether any of the three big cash-buying groups will remain as active in the coming years. Institutional investors are now shifting from buying multifamily schemes to developing their own as the availability of entire residential blocks is becoming scarce. As for traders up and down, there is a sense that they mobilised quickly when the market began to stabilise in 2013, and now their 'mattress money' has been spent. Indeed, movers fell from 49pc of cash sales in 2013 to 37pc in 2014. Finally, with residential yields contracting and the capital gains tax incentives now gone, some people have questioned whether cash-funded small investors will continue to have such a presence in the market.

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