Home truths: The story of Eoghan and the home hoovers
The big view on Ireland’s property market
Whenever Eoghan Murphy is asked about his unforgettable term as Minister for Housing, one of the first things he says is: “I changed the planning laws to enable the development of apartment blocks, which wouldn’t have been built otherwise.”
And this is totally true. Almost none of the blocks constructed since the minister made those key changes would have been built without them.
Another take on this is that he changed the planning laws overnight to enable a goldilocks investment prospect for the sort of big profit funds which are now busy commoditising city housing around the world. The sort of funds which are widely cited as being responsible for elbowing regular buyers, renters and landlords out of cities.
And how? He did it by permitting the construction of smaller homes, with less windows, stacked much higher than previously allowed and by abolishing the requirement for parking spaces.
Over at finance, Paschal O’Donohoe allowed the hugely favourable tax terms which have generated massive profits for those funds as they today mooch about the greater Dublin area, sucking up a huge chunks of entire new schemes, both apartments and houses.
At the same time both Government politicians have produced a regime which has pommelled traditional small landlords out of the market. For traditional investors (including reluctant landlords) this includes 40pc rates of tax, rent caps and a series of prohibitive regulations to govern their conduct.
The Government-favoured funds are for sure a necessary component of most housing markets. Without them, international firms coming to Ireland would now struggle to house their workforces.
But Dublin is now a clear example of what happens when funds are let loose with such ultimately favourable planning and tax terms that they completely dominate new home purchasing, and at the expense of everyone else.
We have older home owners in mature areas who can’t trade down because none of the new apartment schemes are being offered on the open market. There’s the families who can’t buy their old houses in turn. There’s the renters who can’t afford the amounts funds are charging and suffer doubly because their arrival in force raises the wider rental bar locally. There’s the first-time buyers who can’t benefit from a new three-bed semi because the funds are buying them up. There’s the small landlord who can’t compete. All laid on a plate for the funds.
Witness the Dublin Docklands Residential Report 2020 published this week by the Owen Reilly agency which asserts that funds will likely to buy every new apartment constructed in the Docklands in 2020. It says that 92pc of apartments in the area are being rented at 20pc above the average rate to non-Irish staff coming here to work at Google, Facebook, Twitter and the international banks in the IFSC. The report asserts that the Irish renter has been priced out (down to 8pc) and cannot pay the rents now being paid charged.
Presciently, it also notes that small landlords accounted for 75pc of those exiting that market over the last year during which the big fund hoover has been absolutely relentless. Thousands of homes have been acquired in the capital and in big commuter towns like Maynooth. Local estate agencies say the funds are now busy scouting for prospects in Limerick, Cork and Galway cities, where new home construction is only just getting underway in earnest.
In changing the planning laws to facilitate them, Minister Murphy acted with the sort of red tape slashing zeal that he couldn’t ever muster when it came to enabling social housing or enough affordable homes. For these he gave us the ‘Rome can’t be built in one day’ argument. Or two Fine Gael terms in office, given that the housing crisis started in 2014.
By laying on the goldilocks tax regime which has facilitated their profits and the further proliferation of their hooverings, (as well as huge salaries for their principals), Paschal Donohoe has helped tilt entire city markets in favour of the big speculators. And in the process he has fed them the home hunting punter on a plate.
The biggest joke is that until the regime created by the two ministers, the big funds wouldn’t touch residential property with a squiffy stick.
Back in the late 1990s Irish Life was busy divesting itself of its residential holdings. Its Mespil apartments disposal turned fiasco as new owners turfed long-sitting pensioner tenants into the streets (in one notable case, using dogs to do it). The golden circles cashed in.
At the time I asked Bill Nowlan (then boss of investment at Irish Life’s property fund), why it was getting out of residential when everyone needed a home? He told me it simply wasn’t worth it. Too many tenants for too much work. Instead Irish Life hoovered up shopping centres and office blocks in the 1990’s.
But in 2020 with retail troubled and office blocks offering a limited 20 year rentable lifespan, punters with increasingly restricted choices always need somewhere to live.
Two decades after Mespil Mr Nowlan has been credited as the man who persuaded Fine Gael Government to introduce the legislation that facilitated the real estate investment trusts (REITs) in Ireland. He also founded Hibernia Reit which today controls property worth more than €1.4bn, of which 11pc is houses and apartments..
The Ires Reit has sucked up almost 700 homes, apartments and houses in and around the space of a year. Urbeo has hoovered up 567 homes. Carysfort Capital/Angelo Gordon snarfed up 799. And when we throw in the other hungry home hoovers like Avestus, Patrizia, Tristan Capital, Kennedy Wilson, IPUT and once again, our old friends Irish Life, it totals more than 4,000 new homes in greater Dublin alone that the Murphy/O’Donohoe enabled fund hoovering machine has snorted up in the last year.
About 6,000 new properties were built in Dublin in the same period. Today Irish developers have become the clients of the home hoovers.
Ministers Murphy and O’Donohoe, take a bow.
Photo by Gabriel Ramos on Unsplash
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