Key urban areas like Dublin and Cork require high density apartment developments which tie in with the requirements of institutional investors and society, according to an AIB report.
The Private Rented Sector in Ireland paper by AIB Real Estate Research economists Pat O’Sullivan and Rory McGuckin finds institutional investors require high quality, large scale apartment units and this source of equity capital is key in supporting the development of a sustainable, functioning PRS sector.
Just 10% of Ireland’s housing stock is accounted for by apartments, compared with 30-50% in some other European countries. According to an AIB analysis, there are almost 13,000 apartments currently in the pipeline in Dublin, with over 9,500 having already been granted planning permission. There are currently 1,261 apartments proposed in Dublin’s docklands specifically aimed at the PRS sector, while a further 1,268 are proposed in South Dublin.
The paper raises concerns about the prevailing level and rate of growth in rents in Dublin, and to a lesser extent other urban locations. Dublin rents are at the sixth highest level in the world according to EU research, comparable with New York, London and Singapore. The paper also finds it is possible, if not likely, that the current growth in rents will be curtailed once new residential supply approaches underlying levels of demand.
The growth of the PRS sector as an investment asset class saw €386.8m of capital transacted in the sector in 2017 across 24 deals, up from €269.1 million in 2016. Further growth is expected this year.
AIB is actively engaged in this sector, providing both development finance and long-term funding solutions for investors in the Private Rented Sector in Ireland.
