Earlier this year Minister for Finance Michael Noonan criticised developers for not embracing equity investment on the grounds that it might translate into lower returns. Without this cash injection, developers weren't building and the residential development market was stalled, exacerbating the rental and housing crisis.
But it seems the ball is not just being held up in the developer’s court. There are also problems on the equity side.
On Tuesday, Irish Residential Properties (Ires), a real-estate investment trust, said it wouldn’t get the capital it needed to fund developments unless investors got a certain rate of return. And it seems getting the return these investors require would mean a return to densely-built, smaller apartments, something many of us thought had been left behind with the Celtic Tiger.
Ires wants to build on its site at Rockbrook, in Dublin’s Sandyford industrial estate, but is hoping that planning authorities will be more “flexible” in their density requirements, allowing it to build more apartments in higher blocks.
It’s a significant turnaround for an area that at one point seemed to epitomise the folly of boom-time overbuilding – one section was even covered with a tarpaulin to hide the unfinished structure beneath, and its future looked uncertain at best.
Indeed, not so long ago estate agents were bemoaning the planners’ post-boom preference for high-density construction, arguing that it was not what the market wanted. Built-up areas such as Sandyford were not where people wanted to buy properties, estate agents said.
Now however, with rents soaring, it seems that this market, with the real-estate investment trusts and real-estate funds at the helm, is starting to dictate development trends.
Just last year, Nama funded the completion of the nearby Beacon South development and within weeks of its launch, almost all of the 84 apartments were rented out. Ires itself has an occupancy rate of 99.7 per cent on its 1,400-plus apartment portfolio.
With demand at such a level, the pressure to build and take some heat off the rental market is keen.
Whether planners will up their density even more however, remains to be seen.
