The construction of apartments for Ireland’s private rental market is almost at a standstill, with just two large schemes in Dublin’s docklands now nearing completion. That’s according to the latest report on the sector by agent Hooke & MacDonald.
The dramatic slowdown, which began before 2024, intensified throughout last year without any newly built or forward-funded private rented sector (PRS) transactions. The only new-build investment sale involved the social housing sector. There were no newly built private homes sold to or funded by institutional investors for the private rental market in the country in 2024, the first time in a decade that this has been the case. And where 9,031 apartments were built in Dublin in 2023, this figure fell by 27 per cent to 6,608 in 2024. Most of these units were built for the public sector or the traditional build-to-sell (owner-occupier) market, highlighting what the report’s authors describe as the deepening supply crisis.
Having dominated the Irish commercial property market from 2019 to 2023, accounting for between 40 and 51 per cent of all investment, transactions in the multifamily/PRS market amounted to about €230 million, or just 9.7 per cent of the €2.4 billion spent across all asset classes last year.
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The largest multifamily/PRS investment in 2024 saw €66 million paid by a private investor for an existing, stabilised portfolio of 136 apartments and houses at Malahide in north Dublin at a net yield of about 5.2 per cent.
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The second largest reported transaction in 2024 was the social housing investment sale of 111 apartments at Grand Canal Harbour, Dublin 8, by Marlet Property Group to New Beginning for €54.5 million.
The third-most significant PRS transaction involved the €42 million sale to the German fund, KGAL by TPG Angelo Gordon/Carysfort Capital of 104 existing and stabilised apartments built by Cairn Homes at Shackleton in Lucan in West Dublin. This was KGAL’s first residential acquisition in Ireland and was secured at a blended net yield of approximately 4.85 per cent,
The fourth largest transaction was another social housing investment sale – 104 apartments in Dublin 7 also to New Beginning for €38 million. Both of New Beginning’s investments were for blocks with 25-year CPI (consumer price index) linked leases, with reviews every three years to Dublin City Council. The transaction pricing for these deals was in the early 4s on a net initial yield basis. Hooke & MacDonald expect that there will be a limited number of social housing investment sales in 2025 owing to the combination of the few long-term lease investments now available and the Government’s decision to discontinue the policy.
Outlook
A mix of investor capital types, including private equity, value-add and core investors, are monitoring the Irish market and looking for opportunities, say Hooke & MacDonald. However, the report adds that there is a disconnect between the pricing funders can pay and the cost to build new apartments, meaning there will continue to be no new transactions or developments. They also find there is a disconnect between the pricing expected by parties with stabilised portfolios and the levels being talked about in the market by potential investors.
Notwithstanding that disconnect, several stabilised developments are expected to be brought to the market in 2025 with the reaction to these sales being watched by the over 25-plus institutional investors with Irish portfolios and direct exposure to the PRS market in Dublin. Spencer Place, which was developed by Johnny Ronan’s Ronan Group Real Estate is due to be brought to the market in the first quarter.
Emergency measures
With the number of apartment completions down by 24 per cent and the level of new-scheme house completions up by a mere 4.6 per cent to 16,200 in 2024, Hooke & MacDonald notes the chronic shortfall in new supply when set against its view that demand is well over 60,000 new homes a year. Consequently, the report’s authors are calling on the Government to introduce an emergency programme for the housing sector.
As part of this programme they call for the following:
- The zoning and servicing of more land for housing;
- Granting of more timely planning permissions;
- The embrace of new housing types to reflect changing demographics;
- The implementation of measures to revitalise cities and towns;
- An acceleration in the use of modern methods of construction;
- Increased funding options for builders and developers;
- The removal of the rent cap and provision of stable conditions for international capital funding the housing market.
Quite apart from their concern in relation to the decline of the PRS market, Hooke & MacDonald express their concern for the viability of apartment schemes aimed towards the traditional owner-occupier. They believe however that the Government’s Croí Cónaithe Cities Scheme, which provides subsidies to bridge the gap between delivery costs and market price, has good potential and will gain good traction in 2025 and beyond.
