Institutional buyers – often described as “vulture” or “cuckoo” funds – are massively outbidding families and private buyers who are increasingly desperate to buy news homes.
The sheer scale of the premium being paid to ensure vulture funds can outbid families was revealed in a report from BNP Paribas Real Estate which showed institutional buyers paid an average of a whopping 32pc more for each home they bought last year in comparison with the average price paid by households.
The average price paid by these huge investors was just under €430,000 – some €104,000 more than the average price of €325,502 that households who bought homes in 2021 could afford.
“Understandably, this is causing frustrations for private buyers who are attempting to compete,” the BNP report observes.
The numbers revealed that 4,900 Private Rented Sector (PRS) properties were bulk-purchased – purchased by funds – in 2021. The funds continue to buy up Irish homes because they know the market is “imbalanced” the report said – meaning that the profit-seeking investors understand that a shortage of supply will ensure that families will be forced to take rental options in these properties because they cannot afford or find a home of their own.
This market imbalance, or shortage in supply, means that the vulture funds are “willing to pay high prices to access such secure income streams”, BNP observes.
The report also highlights another factor in the bidding war which is driving house prices out of the reach of families: demographics.
One of the things attracting the investment funds to Ireland is population growth, BNP explains, noting that we have “the third fastest rate of population growth in the EU.”
Except that’s not the full picture.
In reality, like most of Europe, Ireland’s birth rate is on the floor, which is going to cause us enormous problems sooner than we imagine. The expected population growth is expected to be boosted by immigration which adds to the squeeze on available homes – and as we see from this report – makes Ireland, with our increasingly lax immigration policies and generous guarantees of housing <https://gript.ie/housing-agency-acquiring-free-accommodation-for-migrants-following-their-four-month-orientation-programme/> to applicants from abroad, a sure bet for investment funds.
Meanwhile, struggling families are paying through the nose for a place to call home, as rents continue to soar. Those same rents are being paid to the investment funds who outbid said families, in a truly vicious circle.
Daft’s latest Rental Price Report, issued today, showed that rents in Dublin rose by 4.1 per cent between September and December, the largest three-month increase since early 2014, and that rents rose nationally during this period by 3 per cent, the largest quarterly gain in more than four years. Rents rose almost 9 per cent in Dublin in the that same quarter to €2,059.
The average rent for the nation reached €1,524 in the last few months of 2021 – or double the rent payable in 2011 of €765 per month seen in late 2011.
For families and first-time buyers, the housing market continues to be utterly stacked in favour of the investment funds. The government, and opposition, remain utterly ineffective in the face of a scenario where ordinary people are increasingly seeing the perfectly reasonable ambition of owning your own home become an impossibility.