A new report by Sherry Fitzgerald finds that institutional landlords invested more than €1.7bn in Ireland’s residential sector last year – mostly to forward fund the construction of apartments.
As such, residential investment was the largest segment of commercial real estate in 2021, with 34% of funds going to buy or fund homes to rent.
The figures show that there was €5bn in investment last year, with €1.5bn going to office space and €1bn – or 20% of the total – going to industrial properties, up from 2% in 2016.
Around 71% of the residential investment went on forward purchases, where an investor fronts the money to get a development built, which is then rented out.
In total, 4,100 housing units were paid for with forward investments. All of the top 10 private rental sector (PRS) transactions in 2021 were either part, or wholly funded in this way.
Sherry Fitzgerald expects investment yields to narrow this year. But, the company notes that rents continue to rise, with the annual increase up to last month standing at 9.2%. “Lack of supply is the primary accelerant in this recent uptick in rental inflation, with the pandemic exacerbating an already stark situation.”
New dwelling completions last year were in line with 2020 and 2019, despite the construction sector being in lockdown for some time. More than 30,000 housing starts would contribute to new supply of 26,000 units in 2022, rising to 30,000 and 35,000 completions in the next two years.
The report suggests that big investors will remain highly active and influential in the private rental sector this year, as the shortage of standing stock means forward commitments will dominate the market.
LSL News.