First-time buyers feel ‘pushed out’ by bulk investors
Fianna Fáil is calling on the Government to restrict tax incentives for institutional investors in the Irish property market.
The party said so-called “cuckoo funds” have given rise to entire housing developments being snapped up, locking out first-time buyers.
A review by the Department of Finance into the amount of tax paid by these investors is due to be completed next month.
However, the department said institutional investors make up a very small proportion of the residential market.
Figures from Savills Estate Agents show that almost 3,000 properties were block-purchased by investors last year.
The agency said 234 properties were sold in bulk to investors in the first quarter of this year.
However, some prospective home buyers argue that large investment funds, which purchase properties in bulk, could be making it harder for families to get a house or apartment.
Nicola McCann, from Donabate in Dublin, and her partner are first-time buyers and are struggling to get onto the property ladder.
The couple and their young son moved in with Ms McCann’s partner’s family two years ago in order to save a deposit.
“It has been pull your hair out stressful, like our eight-year-old son is sleeping on a bean bag in his Nana’s room at the end of her bed.
“In Donabate there are so many new houses and then you go and look online and they’re all after being sold to private investors,” she said.
Ms McCann said they are saving nearly €2,000 every month to try to secure a deposit.
“It’s people like us and our friends that are now stuck and are being pushed out of where they want to live because we can’t afford it.”
New regulations being proposed by Fianna Fáil would give local authorities the power to restrict the number of properties being sold for rent.
The party is also calling for a full review of the tax treatment for institutional investors.
Fianna Fáil’s Housing spokesperson Darragh O’Brien said the 2013 Finance Act brought in by the Fine Gael and Labour government makes Ireland an attractive country for funds to do business in.
He said: “They don’t pay capital gains tax, they don’t pay tax on their profits and they don’t pay tax on their rents so why wouldn’t you invest”.
In a statement, the Department of Finance said many collective investment structures are designed so that the tax is payable by the investor or shareholder, rather than within the collective investment vehicle itself.
It said this is the case with Real Estate Investment Trust companies and with funds invested in real estate assets.
The department said that in both cases a withholding tax is applied to ensure tax is collected.
Chief Economist with the Sherry Fitzgerald Group Marian Finnegan said investment funds are an essential ingredient to the property market.
“I think they are a great new addition to the property market.
“We have seen over the last five or six years an emerging trend of Private Residential Investment funds coming into the marketplace.
“They are a very small percentage of the market and represent a very tiny percentage of overall transactions, but they are beginning to provide much needed rental accommodation and that is good news”.
Asked if there was a risk the funds would push first time buyers out of the market, she said: “Absolutely not if you look at the figures for the first quarter they bought in the hundreds and not the thousands in terms of property numbers.
“They are really just a very small proportion of the market overall. ”
Mr O’Brien said the State is also buying properties in bulk, which he said is having an impact on first-time buyers.
“It’s impossible for a potential first time buyer right now to compete against large pension funds on one side and the State on the other because the State is also buying up about 3,000 properties a year where first time buyers would want to buy.
Figures show the Government bought an estimated 2,600 properties from the open market last year.
474 properties were bought by the State in the first quarter of this year.
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