Cuckoo funds and the State snap up 42pc of new homes as first-time buyers feel the squeeze
Cuckoo funds, local authorities, and State-backed housing charities have all stepped up their home-purchasing activities, tightening the squeeze on first-time buyers.
So-called non-household entities bought 13,500 homes last year, up 15pc on the previous year.
This means that one in five purchases of all residential properties is now accounted for by cuckoo funds, county councils or housing charities.
Investment funds that buy homes have been dubbed cuckoo funds as they buy directly from developers to rent out the properties, rather than the units being sold to people who want to live in them.
The CSO figures also show there was a big increase in transactions of new homes last year, to 15,600.
Non-households accounted for 42pc of new homes purchased, the highest share since the records began in 2010, according to Dermot O’Leary, economist with Goodbody Stockbrokers.
Lorcan Sirr, lecturer in housing at Technological University Dublin, said cuckoo funds and State-funded buyers were pushing household buyers, particularly new purchasers, out of the market.
Dr Sirr said housing output has doubled in the last five years.
But the number of properties available to buy for first-time purchasers and movers have fallen to half the housing output, to just 28pc, after one-off houses are excluded.
There are fewer homes to buy, due to the surge in purchases by cuckoo funds, State-backed buyers, such as local authorities and approved housing bodies, he said.
And the Government plans to ramp up its buying of homes – a move prompted by the controversy around the lifting of the eviction ban.
Dr Sirr said the CSO figures show that non-household entities purchased almost the same amount of housing in 2022 as did first-time buyers, at 13,519 compared with 15,906 bought by first-timers.
“At a time when small landlord activity in the market is down 28pc since 2017, non-household entities bought two-and-half times more housing than did small landlords in 2022,” he added.
These houses will also be available for rent, but the difference is that the small landlord pays tax on the rental income which stays in Ireland, whereas it is very likely the non-household entity will pay little to zero tax on their rental income, said Dr Sirr.
He said it was evident that non-household entities see little hope of more homes being built for sale in the coming years.
This means there is the potential for significant returns to be made from renting – either to households or to local authorities for social housing.
He said renting to a local authority tends to be on “particularly generous terms”.
The total value of the purchases by non-household entities in 2022 was €4.6bn, an increase of 32pc on the 2022 value, according to the CSO.
A further 1,770 homes were bought by various non-household entities last year than in 2021.
Vulture funds were behind 23pc of the €1.5bn spent by non-household buyers last year, the CSO said. This amounts to €357m in purchases.
This means cuckoo funds are spending €30m a month on buying up homes, mainly apartments.
The CSO said property prices rose in January but at a much slower pace than in previous months.
Prices were up by 6.1pc in the year to January 2023. But in the month of January they fell by 0.6pc when compared with the previous month.
This is well down from the high values of 15.1pc in the year to February and March last year.
Many of these prices reflect deals from as far back as the start of autumn as they are based on filings of purchases lodged with Revenue, and there is a time lag element to this. These prices date from before mortgage rates started to rise.