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Reflecting on the year in property

This time of year generally prompts some reflection about highs and lows, industry winners and losers. In the context of the Irish property market, 2020 ought to have been a washout, yet, for some segments of the market, the very opposite is true.

According to an opinion piece by Ken MacDonald in The Irish Times this week, Dublin’s private rented sector (PRS) has been “the standout performer of 2020”. As managing director at Hooke & MacDonald estate agency, he is well placed to identify new homes trends and interpret performance before it becomes obvious. And with close to €1 billion worth of residential property likely to be sold to “big investors” by year end, he is absolutely right. In Dublin, PRS accounted for 44 percent of all investment transactions in 2019 (offices accounted for 32 percent) and is likely to account for 50 percent of 2020 investment transactions. The article acknowledges the chaos of the year and notes that the private rented sector here proved itself to be remarkably resilient in the face of this uncertainty, with ‘multi-family’ now recognised as a mainstream investment category. And as an asset class, the long-term nature of the investment, coupled with relative market stability and predictably low vacancy rates, means this sector is underpinned by objectively sound fundamentals. Whether or not the growth of an institutionalised PRS is good for the overall marketplace or for individual investors is an entirely different question for another day. 

The above article highlights the lack of viability on potential new (apartment?) developments in parts of Dublin and across the regional cities, as the “main drawback to realising its full potential” and going further, to suggest that “without viability, these developments cannot be funded or started and the permissions will wither”. The reality is that our population continues to increase and, despite some positive mortgage moves in early 2020, affordability remains the nut that cannot be cracked, by neither the public nor the private sector. Persistent lack of affordability, aggravated by consistent under-delivery of new homes  – made significantly worse by the pandemic – means that the rental market is likely to remain the most robust for the next few years, with the possible exception of social housing. Or as the article puts it: “One can see why this sector has an important role to play in Ireland for the next few years at least.” The author is right to position the PRS as part of the housing solution, however, it would be remiss not to acknowledge that it is part of the affordability problem, from which it profits. The policy challenge, it would appear, is to allow PRS to serve the market without eating it – by that, we mean that it cannot detract from the larger, long-term goals of more accessible, affordable and sustainable mixed-tenure housing that facilitates homeownership for ready consumers. Perhaps this is easier said than done…

 
 

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group