The property industry’s role in the supply of private rented housing Peter Stafford, Director Property Industry Ireland.

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]