After ditching the market, small-time investors are snapping up Dublin homes in force again

WHILE THEY MADE up a tiny fraction of the market after the property bubble burst, smaller buy-to-let landlords have returned to Dublin – and they’re likely to feature even more prominently in Ireland’s property scene in the future.

A new CSO residential property price index, which for the first time includes data such as figures for cash purchases, revealed ‘household buyers - non occupiers’, or those who don’t live in a home following a purchase, accounted for only around 6% of all residential market transactions in Dublin in 2010.

About 5,700 homes changed hands in the capital during that period, around the time the property market bottomed out after the housing bubble popped.

However sales started to climb again in 2013, as did the numbers of people buying but not occupying their own homes.

During that year there were just under 9,000 sales in the Dublin market, with ‘non-occupiers’ accounting for about 15% of the market – while by 2015 the group made up 14% of the near-14,000 transactions.

Non-occupier purchases in Dublin

Returns

According to John McCartney, director of research at property group Savills, the vast majority of people in this category are small-time investors.

McCartney pointed out that the CSO stats only show when people are entering the market – giving no indication of who is selling out – however he added that many investors are likely opting for a property purchase for the attractive return.

“I believe the inflow greatly outstrips the outflow. Gross yield on a house is 6% in virtually every neighbourhood across Dublin.

“Even if you take into account the costs (of maintaining the property) and say in net terms it is about 4%, that is much higher than bank deposit rates. If you have cash it is a no-brainer,” he said.

“If you have €200,000 in savings would you do it? Probably not. But if you had €500,000 or €400,000, you may consider it.”

Some people are choosing to invest in property

Space for investors

As previously examined by Fora, large-scale investors such as private equity companies have also snapped up a significant chunk of Dublin housing over the last few years.

However, McCartney said that most of the large swathes of homes available after the crash were now gone – and that meant institutional investors were starting to focus on building the houses themselves.

He said that left space for investors with some cash to buy up individual units – and the trend may put increased pressure on house prices, which rose 6.7% in the year to July.

“Because the corporations have moved to a different business model, it leaves the door open for smaller retail investors,” he said.

“Cash investors are not beholden to mortgage providers, so they are not affected by the Central Bank’s mortgage rules. First-time buyers are outbid by cash buyers, because cash investors can allow getting into a bidding war at a higher price.”

House prices

But when it comes to investors’ effect on house prices, economist Ronan Lyons has a different view. While he agreed that more small investors are likely buying up properties across the country, he did not think it has much effect on pushing up costs nationwide.

“There are plenty of two-bed terrace houses and apartments for less than €100,000 and most have a reasonable yield, so it is no surprise that cash is going into investing in property,” he said.

“Some people argue that they are competing with first-time buyers, but the standard investor doesn’t do that. The first-time buyer will take a lower yield and is funded by debt. If you are an investor, one of your key priorities is annual return, and a first-time buyer doesn’t think in those terms – so they will take a lower return by paying a higher price.”