Cuckoos & magpies: state house-buying hits record

Recent headlines suggest first time buyers are being pushed out of the housing market by ‘non-household’ buyers, so-called ‘cuckoo’ funds. Official figures suggest that private companies are not the only competition in the new homes market – there may be a ‘magpie’ out there also.

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There are three sets of figures relating to ‘non-household’ purchases.

1) The Central Statistics Office

The CSO records stamp duty transactions filed and executed for all home sales, including state-funded purchases of homes subject to zero stamp duty.

According to the CSO, first-time buyers purchased 4,179 new homes nationwide with 1,869 in Dublin, and activity in this segment increased 14.5% year-on-year.

Where a single bulk transaction included several dwellings, the CSO extrapolate numbers of dwellings per transaction to get an accurate a picture of the new home sector.

In 2018, there were 2,795 non-household purchases of new homes nationwide, including 1,245 in Dublin, and overall levels were up 30% year-on-year.

Both ‘non-household’ and first-time buyers have contributed to higher levels of new home transactions and price inflation.

2) Private rental sector

A recent report by agents Savills confirms that investment in the private rental sector has increased significantly to €1bn in 2018.

Hooke and McDonald have recorded that nine of the top twenty-five ‘non household’ block-purchases of dwellings were new developments (Residential Investment Market- Q1 Report 2019; Hooke and McDonald) and suggest that private companies paid €626m for 1,413 dwellings in blocks in 2018.

Table 1

However, this is 130% of the CSO Dublin total for non-household purchases for the year. There may be some element of creep in figures with purchases not being completed till the next calendar year and as a result private rental sector activity may not be accurately recorded.

3) Local authorities & approved housing bodies

The third set of figures is from official Rebuilding Ireland social housing update reports and suggests that the government’s state-funded house-buying programme is playing a major role in the non-household sector. The state is almost entirely reliant on the private sector for both social rentals and new and existing social homes. Of the 27,103 social housing ‘solutions’ delivered nationwide from all sources in 2018, 94% were sourced from the private sector.

The Department of Housing produces detailed figures for local authority and approved housing body (AHB) delivery of social housing on a quarterly basis. Last year 2,100 new homes, so-called turnkey units, were purchased off the plans by local authorities and AHBs from private developers plus 832 new part V private homes. An additional nine Part V units were leased in 2018.

Rebuilding Ireland recorded a total of 2,932 non-household purchases nationwide in 2018. This figure is almost 105% of the CSO recorded total for the year.

Table 2

The official claim is that the state purchased 1,065 new homes in Dublin, 86% of all non-household purchases in Dublin in 2018. Figures may suffer from creep and as a result activity may be overstated.

Table 3

The differences between private sector, official figures and the CSO recorded data are significant and merit further scrutiny in advance of any policy shifts.

If official claims are correct, one in four new estate homes and apartments sold last year were purchased by either local authorities or approved housing bodies.

Since 2011 the state has spent €1bn buying almost 7,200 privately built homes. Under the Rebuilding Ireland housing plan, state-funded purchases of new homes have doubled year-on-year. This spending spree is set to double again this year.

The government is possibly the biggest cuckoo of all. First-time buyers may be facing the biggest competitor for new homes, the state itself.

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