Apartment sales tipped to hit over €300m this year
More than €300m worth of rental apartment blocks and portfolios are expected to be sold in the second half of this year according to the latest investment property report from estate agents Lisney.
Among them could be about 200 units at the Grange apartment scheme, near Stillorgan, which was developed by Ray Grehan at the height of the boom and which are expected to come to the market.
Lisney reports that strong demand for apartment blocks has seen the sector become the strongest investment performer in the 12 months to June.
Despite rising rents, prices being paid for private rental sector (PRS) investments are rising even more rapidly and this is reflected in the reduced yields from this sector.
Over the second quarter of the year, PRS yields dropped by 25 basis points and over the 12 months by 75 basis points.
Nevertheless, at 5.75pc gross, they are still higher than the yields from prime retail and offices. The latter saw yields increase by 10bps during the 12 months to 4.5pc, according to Chris Belton of Lisney.
The key reason for the upsurge in PRS demand has been the hype around the housing shortage, says Richard O'Neill of Allsop.
"Earlier in the year some agents were concerned that the 4pc cap on rents in the rental pressure zones might deter investors, but investors appear to have shrugged off those concerns," he adds.
Not all agents are assured. Ross Harris of Cushman & Wakefield says that he would like to see the sector's performance over the next quarter at least before he can be assured on the cap. Yet he also believes that yields could harden by a further 25bps in the coming months.
"We have seen demand coming from US, British and European investors who are not yet in the Irish market. Some of them are institutional and so they can adopt a long-term view and accommodate lower yields," he adds. Among the deals which are expected to complete this year is German fund Patrizia's advance purchase of two blocks at Cosgrave's Honeypark development in Dun Laoghaire comprising 319 apartments. The Hooke and MacDonald-brokered deal is believed to have secured €132m.
In addition,Dublin Artisan Development Fund - backed by the Irish Strategic Investment Fund -has bought 131 apartments at New Bancroft Hall, Tallaght, from Park Developments for more than €30m. But the €300m could be more than doubled if Pat Crean's Marlet succeeds in getting forward funding for his planned 1,800 apartments on six Dublin sites whose combined value alone could top €500m.