Dear Editor,
It is encouraging to read your acknowledgement of the strides made by the government in the housing sector in your recent editorial. As we forge ahead, promising results are anticipated, primarily due to the joint efforts of financial and development practices. Institutional investors play an instrumental role in this success, having facilitated most of this progress. Data from recently conducted research indicate that about 60% of the capital necessary to realise the full housing output of 2022 was sourced from institutional financing. Your article did suggest a dip in the enthusiasm of investment funds towards the private rental market due to external influences. The sudden surge in interest rates surely took the financing markets by surprise.
Nevertheless, the anticipated progress in the forthcoming 12 to18 months signifies an eventual rebalancing of assets and the resurgence of liquidity as buying and selling prospects come together. Interest rates will stabilise, not necessarily going back to previous lows, but will establish a new balance. Institutional investors remain the prominent financiers of housing production. As inconvenient as it may be for some to admit, an initial glance at the shareholder lists of the top two home-building firms reveals they are overwhelmingly backed by institutional capital. Across the market, non-banking lenders, namely the institutional investors, consistently remain the primary providers of debt capital for home builders. It is predicted that the next government will establish a revised ambition to construct approximately 50,000 new dwellings annually, necessitating around €15 billion of funding each year. Roughly €9 billion of this total is projected to come from non-governmental and non-banking sources. The only practical and sustainable financiers capable of providing this substantial funding are the institutional investors. It may not be everyone’s preference, but neither a substantially dwindled banking sector nor the State can come close to bridging this financial disparity.
Yours Sincerely,
Pat Farrell,
Chief Executive Officer,
Irish Institutional Property,
Dublin 2.