Large-scale private rented sector (PRS) investors, sometimes called vulture or cuckoo funds, have rapidly become a major force in the Irish property market over the last few years.
As recently as 2017, these funds were a minor and insignificant part of the housing market. However, these firms have spent more than €6 billion buying Irish homes, apartment buildings, and commercial properties over the last three and a half years.
The cuckoo funds show no sign of slowing down in 2021, as they have spent €1.5 billion so far this year, according to recent figures from estate agents and property adviser JLL. Most of these funds are backed by international investors, and have quickly become big players in the market, particularly investing in deals for new apartments in Dublin.
But what is driving this relatively new and rapidly growing force in the market?
Analysts say that an influx of cash in European markets, lack of yields in traditional assets including bonds, and the huge surge in housing demand and high rent prices in Ireland have combined to create a very lucrative investment opportunity for vulture funds. The increase in interest of international funds in Irish property was in part driven by the lack of a short term solution to residential property supply across the market, says head of research at JLL Hannah Dwyer. This lack of supply, combined with recent increases in demand, has driven prices to the highest levels since 2007, and with much pent up demand from the covid-19 pandemic and subsequent lockdowns, we may see cuckoo funds try to buy up even more property.
Cuckoo funds have made more than €1.5 billion in property investment deals through the first 6 months of the year, bringing the total to €6.2 billion, per JLL. Rental investments dominated these deals, representing more of the value than factories, offices, or shopping centres.
The biggest residential purchase of the 3 months leading up to June 2021 was a monster €200m purchase of apartments at Royal Canal Park, Ashtown, Dublin. Who was behind this deal you may ask? a German investment fund by the name of Union. In fact, vulture funds were involved in all of the biggest deals in that three month period.
However, the Government has taken recent action in an attempt to defer these funds from buying entire blocks of houses in bulk, as one foreign investment firm did in early may, buying nearly two entire developments in Dublin. They have recently introduced a stamp duty on bulk buying of houses, but this does not apply to apartments or properties to be leased.