Apartment investments generate fourth highest yields in Europe at 3.75pc
The strength of the rebound in Dublin’s residential rental investment market has positioned it in the top 10 of a new survey of 27 global cities.
Key factors driving the rebound include rental momentum, the dominance of Dublin in the Irish market, and the reliance of Dublin on international migration. Another key factor is the turnover of renters by generation.
These are among the findings by estate agents Cushman & Wakefield in its report on the Global Residential Impact of the Covid rebound around the world. Among European cities, Dublin is ranked fifth.
The agents say that while supply is now ramping up in Dublin, including that of social housing, this is restrained by the fragmentation of the market among individual owners. Meanwhile a separate survey by Cushman’s Dublin team shows Dublin’s apartment investments generating the fourth highest yields in Europe at 3.75pc.
The firm estimates that less than 10,000 apartments were under construction in Dublin last month, and of these about 1,400 will be delivered this year; about 5,300 next year; and about 3,100 in 2023.
Despite the international investor demand, Cushman’s Kate English says there may be a need for vendors to offer rental guarantees to purchasers while they wait for a scheme to become largely occupied.
This means that apartment developments which are pre-let to local authorities or approved housing bodies are more attractive for investors.
Consequently, where a social leasing agreement is in place, “these developments are trading ahead of PRS values,” she adds. Investors are willing to accept a lower return (3.5pc) from big-build social leased schemes – as the long-term guaranteed income makes them more attractive than prime private residential sector yields (currently around the 3.75pc mark).
PRS investment transactions totalling €345m were agreed in Ireland during the first quarter of 2021, more than triple the €100.5m in the same period for 2020.
The largest deal was a forward commit transaction which traded off market for €66m. It was closely followed by Glenveagh’s sale of 134 units in Marina Village, Greystones, to German investor Real IS.