Build To Rent or Build To Sell
The recent forward purchase (for a reported price of €138.5 million) by Irish Life Investment Managers (ILIM) of 262 apartments from Park Developments in Fernbank, Churchtown has highlighted both the attractiveness of the Private Rental Sector (PRS) as an investment class and the profitability of this transaction for Park Developments. With ongoing commentary on the viability of the construction of affordable homes and the publication of a number of reports by the Department of Housing, Planning and Local Government and others regarding the cost associated with apartment and housing development – the continued difficulties around the viability of residential development for individual sale is clear. Given that average residential rents countrywide are at an all-time high of €1,261 per month – the combination of high rent levels achievable and the viability issues around building homes to sell are driving build to rent as an attractive development option either for forward sale or operation by Developers.
This study looks at current affordability levels and calculates what value of loan a typical FTB can obtain and how much they can possibly save to accumulate a deposit. Given these estimates an affordability level for each household income level is calculated based on the household income distribution published by Ireland’s CSO – i.e. the price target that must be met by a housebuilder to enable a purchaser with a given income level buy a home.
The study then looks at the current makeup of the components of sales price of houses and apartments in Q2 2018 and discusses the feasibility of constructing homes for this market given the estimated affordability limits. Finally, an analysis of Build To Rent as an alternative development option is presented. The findings are summarised as follows:
The full study can be downloaded here build_to_rent_or_to_sell.pdf
Should you have any questions about the study please contact us.
 Source: Irish Times 10/5/2018 & 6/7/2018
 Source: www.Daft.ie 4/5/2018
 Source: ESRI
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