Department of Finance officials reported “no change” in the relative size of institutional housing investment in 2021, half a year after a new tax was imposed on bulk house purchases to protect first-time buyers.
Research carried out for Minister for Finance Paschal Donohoe shows institutional investors bought 4,744 housing units in 2021, 555 more than in 2020 as real-estate investment trusts stepped up buying activity.
“Their share of market transactions remained flat, however, at 9 per cent of all units purchased over the two years,” departmental officials said.
Institutional purchases in 2021 included 2,024 houses — 4.4 per cent of the total — as well as 2,750 apartments — 24 per cent of all apartments that changed hands.
The research, reported first in the Business Post, was drawn from annual housing data published in June by the Central Statistics Office. Facing controversy last year over an institution’s bulk purchase of an entire housing estate in Co Kildare, the Government had in May 2021 imposed 10 per cent stamp duty on the multiple purchase of 10 or more houses.
The aim, Mr Donohoe said then, was to “dissuade” institutions from buying up new homes in bulk, denying first-timers the opportunity of buying a property.
Apartments were exempted from the new tax, which increased stamp duty for institutions buying multiple houses from 1 per cent on the first €1 million of the purchase price and 2 per cent on any amount above €1 million.
“Overall, no change in the relative size of institutional investors in the market,” said a Department of Finance official in a comment on the 2021 research, released under the Freedom of Information Act.
The paper showed non-household entities purchased 11,600 housing units in 2021 — 20 per cent of the total, down from 22 per cent in 2020 and 2019. Purchases by first-time buyers comprised 26 per cent of the 2021 total.
State entities bought 3,721 housing units for social housing in 2021 — comprising a “relatively flat” 6 per cent of the total and 32 per cent of non-household purchases.
State purchases were largely concentrated on houses, which comprised 76 per cent of such purchases. All told, the State bought 2,819 houses and 902 apartments.
The report said institutional purchasers were “disproportionally” weighted towards apartments, which comprised 58 per cent of the total in that group.
“Purchases made by the ‘Financial & Insurance’ category fell by almost 8 per cent in 2021 on an annual basis, accounting for just over 20 per cent of non-household purchases,” the department’s research said.
“Most notably, purchases made by real estate management companies increased by almost 60 per cent on an annual basis, to 2,122 units and accounted for 18 per cent of purchases by the non-household sector in 2021.”
The report said the scale of institutions’ apartment purchases reflected their preference for “build-to-rent” apartment schemes.
“The CSO do not break down apartment purchases into new and existing apartments. We cannot therefore estimate how many new apartments were purchased by such buyers,” the paper said.
“However, it is likely that a significant proportion of institutional purchases were of new apartments, bought under forward-commit deals. If so, many of these apartments were built to order and were never intended for individual sale. It is likely that many of these apartments would not have been built in the absence of such agreements.”