The Government’s plans to protect home buyers from competing with institutional investors will have no impact for up to three years, with up to €1bn worth of homes pre-sold to cuckoo funds.
Housing industry sources and analysts estimate that at least 3,000 homes due for completion in the next two to three years have already been snapped up.
Darragh O’Brien, the housing minister, last week announced that councils will be empowered to ringfence up to 50% of new developments for owner-occupiers. However, he made clear that measure would only apply to planning permissions made after last Wednesday.
With 80,000 active granted planning permissions across the State, fears have been raised that the measure will take years to have any benefit due to the time it takes between planning and homes being built — usually three to four years.
Opposition politicians and housing analysts say the number of homes already sold could be well in excess of 3,000, although there is no way of being certain as most developers are private businesses.
However, of those homes sold, 1,800 alone are from the country’s two largest housing PLCs — Cairn Homes and Glenveigh.
Glenveigh’s financial statements show that as of February 25 this year, it had 950 forward sales, up from 475 in 2020.
Cairn’s annual report, published in March, shows that it has a forward sales pipeline of 925 homes valued at €307m.
At the time, Cairn chief executive Michael Stanley said that cuckoo funds accounted for 30% of its sales in the medium term, adding that “almost all” apartment developments (exempt from the Government’s new rules) are forward-sold.
Mr Stanley said: "There is nobody building speculative apartments where they don’t yet have a buyer or a forward buyer."
Both Cairn and Glenveigh declined to comment on how the new rules will affect their forward-selling plans.
A spokesperson for Mr O’Brien said that the plans cannot be retrospective.
“The minister has been very clear that the new planning guidelines... only apply to future planning permissions,” they said. “They do not apply retrospectively, as this would be open to legal challenge.
“The increase in stamp duty brought forward by the minister for finance by way of financial resolution is an immediate measure.”
Sinn Féin housing spokesman Eoin Ó Broin said the scale of forward purchases by institutional investors is “staggering”.
“This is playing havoc with the housing market,” he said.
"Working people are left trapped in high-cost rental, not knowing if they will ever be able to afford a home.
“The measures announced last week will do nothing to stem the flow of homes into the private rental sector.
“This will continue until the Government steps in and takes radical action, both to stop investment funds from forward purchasing homes and to increase capital investment in the delivery of thousands of affordable homes to rent and buy.”
Investment funds bought over 5,800 homes in Dublin in 2019 at a cost of €2.4bn, with 57% of all new builds in the capital snapped up.
While focus has been drawn to the purchase of 135 homes at an estate in Maynooth, the scale of that spending is seen in a report on the Dublin property market, which was published by estate agents Hooke & MacDonald in February.
It shows that, while Covid drastically affected the sales of multi-family or private rental sector properties last year, 2019 saw 45 such transactions take place across the capital, with funds buying up as many as 765 homes in one transaction.
The analysis shows that 2,909 newly-built units were sold as PRS in 2019 in Dublin out of the CSO total filings of 5,128.