Monday 21 October 2019

Home ownership decline will see Ireland reach German levels - report

Eoghan Murphy’s department defended the ‘cuckoo funds’. Photo: Frank McGrath
Eoghan Murphy’s department defended the ‘cuckoo funds’. Photo: Frank McGrath
John Mulligan

John Mulligan

Home ownership rates in Ireland will continue to decline until they reach a level like that of Germany, a report claims.

The report from Davy Stockbrokers says strict mortgage rules, demographic shifts and a lack of housing will all contribute to the continuing fall.

It notes 80pc of homes in Ireland were owner-occupied in 1990. The rate is now estimated at 70pc.

That is still higher than in countries such as the UK, France, Germany and Sweden.

The report concludes that the home ownership rate will steadily decline to a figure comparable with Germany, where it is 51pc. Close to 60pc of the housing stock in Germany is composed of apartments, compared to just over 10pc in Ireland.

"Home ownership rates in Ireland are likely to decline, reflecting the lack of housing supply, stretched affordability and the constraints of the Central Bank's mortgage lending rules as well as the cultural changes and demographic shifts," the report says.

It also says that so-called cuckoo funds are not displacing owner-occupiers from the property market.

The practice - in which entire apartment schemes are bought by a single corporate investor rather than being sold to individual buyers - have been the target of criticism in recent months. The investors typically include entities such as giant pension fund firms.

But last week, AIB also insisted the funds are essential for the development of large-scale apartment blocks, which would not otherwise be financially viable.

Housing Minister Eoghan Murphy's department also last month defended the "positive effects" cuckoo funds have on the housing market.

Its comments were in response to a blistering attack on its housing policies by UN special rapporteur on housing, Leilani Farha, who accused the Government of facilitating the "financialisation of housing".

Davy Stockbrokers predicts that Ireland will continue to see significant amounts of money flow from financial institutions into the private rented sector in the long-term.

It has been claimed as much as €6bn of potential institutional money is targeting the private rented sector.

So far this year, there have been deals in which hundreds of apartments changed hands between institutional investors in Dublin.

Ires Reit, the largest residential landlord in the country, raised €134m from shareholders in June to finance the purchase of 815 apartments from New York-based Marathon Asset Management.

Last year, €1.1bn was spent in by institutional investors in Ireland's private rented sector, up from €200m in 2017.

"They [cuckoo funds] will push up prices for new developments," said Conall MacCoille, chief economist at Davy Stockbrokers.

Irish Independent

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