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The property industry’s role in the supply of private rented housing
Peter Stafford, DirectorProperty Industry Ireland
Why invest?
“Portfolios of rented homes can provide strong and stable income at a time where traditional investments are underperforming.”
CEO, Essential Living, The Guardian (26 February 2014)
Why invest
“While small portfolio landlords have an important role in the market rented sector, it is reasonable to hope that greater institutional investment could lead to the development of new products that better meet the needs of many London renters, and might also help to improve standards sector-wide.”
Centre for London Institutional Investment in London’s Market Rented Sector (Report for the City of London Corporation, January 2013)
UK Government position
“If the housing market were working well, strong and sustained demand for housing would prompt a steady increase in supply. However, this has not been the experience of recent decades.” “With demand for rental housing likely to continue to rise, we must continue to support innovation and investment.”
HM Government Laying the Foundations: A Housing Strategy for England (November 2011)
Investment tools
• Customer demands• Activities of existing investors• Leading indicators• Barriers to investment• Predicting future returns
Investment tools
• Customer demands• Activities of existing investors• Leading indicators• Barriers to investment• Predicting future returns
Tenants’ intention to remain renting
Dublin Rest of Ireland0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Don't knowNoYes
PRTB/DKM
Investment tools
• Customer demands• Activities of existing investors• Leading indicators• Barriers to investment• Predicting future returns
Rental income compared to loan / mortgage
Falls shortCoversExceeds
PRTB/DKM
Intention of landlords
Buy moreMaintainLeave asapDon't know
PRTB/DKM
Profile of vendors
Selling investmentBank repossessionExecutor saleRelocatingLarger houseSmaller houseOtherNursing home
Sherry FitzGerald Research
Profile of purchasers
Ireland Dublin0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
DevelopmentAdditional ResidenceInvestmentOwner occupier
Sherry FitzGerald Research
Investment tools
• Customer demands• Activities of existing investors• Leading indicators• Barriers to investment• Predicting future returns
Investment tools
• Customer demands• Activities of existing investors• Leading indicators• Barriers to investment• Predicting future returns
Threshold: Barriers to investment• inadequate revenue income due to the greater service
obligations associated with managing residential compared to renting commercial property;
• few opportunities for reducing management costs because residential purchase opportunities are generally modest in size (individual apartments rather than apartment blocks);
• buy-to-let mortgages are available which enable individuals to invest in the private rented sector but no financial products have been devised to support investment by institutions;
• inadequate data on rent yields;• a poor legislative framework for the governance of the private
rented residential sector.Threshold (2004)
Opportunity Knocks?: Institutional Investment in the Private Rented Sector in Ireland
Investment type
Opportunistic
Embedded
Cost of apartment construction
Additional cost of Local Authority Residential Guidelines compared to DoE Standards
• Apartment size • Dublin City
• Dual aspect rules • Dun Laoghaire Rathdown
• Floor to ceiling heights • Fingal
• Balconies • South Dublin
• Cork
Additional construction cost per room of a 2-bed apartment
Dept. Envi-ronment
South Dublin
Fingal Dun Laoghaire / Rathdown
Cork City Dublin City
€0
€5,000
€8,000
€29,000
€35,000
€38,000
Investment tools
• Customer demands• Activities of existing investors• Leading indicators• Barriers to investment• Predicting future returns
Housebuilding
2006 2007 2008 2009 2010 2011 2012 2013 20140
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
LA Voluntary Private
DECLG
Planning permissions
2006 2007 2008 2009 2010 2011 2012 20130
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
Houses Multi development housesOne off houses Private flats/apartments
Investment type
Opportunistic
Embedded
Investment tools
• Customer demands: Increasing• Activities of existing investors: Reducing• Leading indicators: Undersupply• Barriers to investment: Changing• Predicting future returns: Regulatory
environment uncertain
The property industry’s role in the supply of private rented housing
Peter Stafford, DirectorProperty Industry [email protected]
