Managing Director of Grayling Properties, Peter Horgan outlines and highlights the opportunities for more purpose-built accommodation within the Irish market as recent Daft.ie report records “new low” of available rental properties.
Over time, international investors have displayed an increased level of interest in trying to identify different investment channels within the real estate landscape, as they look to expand existing portfolios. Moving away from the familiar retail and office spaces, there has been significant interest and demand for investment in more niche areas of the real estate sector.
Purpose-built residential accommodation (known in the US as ‘Multifamily’) units and their associated amenity spaces are specifically built for long-term rental. Considering the inherent supply and demand crisis Ireland is facing today, this sector has become increasingly appealing to investors, funders and developers. After gaining increased popularity in both the UK and the US, the sector has become a significant investment opportunity within the Irish real estate landscape.
THE LIFESTYLE CHANGE
The shortage of affordable housing in Ireland has contributed to a dramatic lifestyle change. This can be attributed to a multitude of factors; popularity of homeownership, lack of available land, planning restrictions and scarcity of affordable housing. The latest daft.ie report indicates that market rents in the first three months of the year were almost 12% higher than they were in the same period of 2021. According to the Central Statistics Office, property prices surged by 14.4% nationally in 2021, recording the strongest level of growth in the market for nearly seven years. The price of an average home in Dublin exceeded €500,000 last year. With an average price like this, to buy in Dublin, first-time buyers would require an income of more than €130,000 to qualify for a mortgage under the Central Bank rules.
Traditionally, Ireland has been associated with high levels of homeownership, but this is no longer a feasible option for many people. With this change in lifestyle and the demographic shift towards younger people renting properties for longer, the current housing climate in Ireland is becoming more and more favourable for “multifamily” developments.
Like the concept of the 15 Minute City, purpose-built developments first emerged as a trend in cities in mainland Europe and overseas. In the United States, institutional investment in housing has grown significantly, from circa 2% in the 1980s to 24% of total United States institutional investment holdings today. In contrast to the mature US market, the UK has seen strong growth over the course of the past fifteen years with an estimated 45,000 units of stock and a further 130,000 in the pipeline. In a global context, the Irish market is more nascent but has started to see major sectoral progress in recent years.
RETHINK THE SHAPE OF OUR CITIES
According to calculations from daft.ie, on May 1 it was recorded that there were only 851 rental properties available, down from 3,600 available properties a year ago. With supply shortages prevailing in cities such as Dublin and with the demand for affordable housing continuing to soar, we expect that the BTR (Build To Rent) sector will expand rapidly in the coming years thereby contributing to the housing market by providing much needed accommodation. The Irish Government appears to be supporting the development of large-scale, professionally managed accommodation to increase and improve the stock of housing within the Irish market, presenting us with an opportunity to reconsider the future of our cities.
In March 2018, the Department of Housing, Planning and Local Government published design guidelines for long-term rental developments. This was the first time that the concept of shared accommodation was really addressed. There is an understanding that these developments can have a crucial impact in addressing accommodation shortages in areas of high demand. The Minister for Housing has therefore specifically requested that planning authorities and An Bord Pleanála approve such developments, particularly for the regeneration of older buildings in city centre locations.
Long-term rental purpose-built developments can deliver the large volume of units that cities such as Dublin need to bridge the gap between the demand for accommodation and the shortage of supply. Tenant flexibility, a high-quality amenity offering, and a sense of community are just a few of the elements that make these properties so appealing to prospective tenants.
Purpose-built developments are only a viable investment when managed effectively – the requirement for professional advice is crucial. Grayling Properties is an Irish, fully-integrated property developer and operator, managing more than 1,200 units, with approximately 1,000 units in our construction pipeline. Our team delivers unrivalled outputs managing extensive portfolios for property companies and large-scale investors. Providing strategic advice regarding sales, risk management and capital expenditure, our trusted team of rental property experts can unlock the value and return on your portfolios.