This week’s budget brought a range of measures likely to further damage Ireland’s already fragile relationship with institutional investors, at a time when we need them most.
The headline-grabbing stamp duty hike, from 10 per cent to 15 per cent on bulk residential property purchases, designed to discourage investors from acquiring large housing portfolios, seems unnecessary given the strict planning regulations introduced in 2021. These regulations have already restricted bulk buying, reserving nearly 50,000 houses and duplexes exclusively for individual buyers, effectively preventing their sale to investment funds.
With relatively few housing developments still held by institutional investors, this new 15 per cent stamp duty will likely lead to properties being broken up and sold individually. While this might modestly increase the housing stock for sale, the reduction in rental property availability will exacerbate pressure on an already strained rental market.
The introduction of a 6 per cent stamp duty on properties valued at more than €1.5 million initially caused confusion, especially regarding its impact on sectors such as the private rented sector (PRS) and student accommodation. Although the Government clarified that these sectors are exempt, such uncertainty is unsettling for investors, particularly in a market where rising construction costs and regulatory challenges are already eroding margins.
In May, Minister for Housing Darragh O’Brien emphasised the importance of foreign investment in addressing Ireland’s housing crisis, acknowledging that international capital is needed to fund large-scale developments and increase the supply of new homes. Yet, with each new tax and regulation, the message being sent to investors is one of caution, if not outright deterrence.
Institutional investors have played a pivotal role in Ireland’s housing market, particularly in the PRS market, where they have financed the development of large apartment developments that provide much-needed long-term rental housing. These projects have been crucial in increasing supply, which is something the Government acknowledges we desperately need. But the introduction of rent caps, coupled with higher taxes on bulk buying, raises concerns about whether investors will continue to see Ireland as a welcoming environment.
If the goal is to increase the supply of homes, we must strike a balance that protects individual homebuyers while still encouraging institutional investment
The Government has set ambitious housing targets and has openly stated that private capital is needed to achieve them. However, each new measure seems to make it more difficult for that capital to flow into the housing sector. The higher stamp duty rates and regulatory restrictions may serve to protect homebuyers in the short term, but in the long term they risk reducing the flow of investment that is necessary to build the homes we so desperately need.
Ireland cannot afford to alienate the very investors who have the capacity to fund large-scale housing developments. If the goal is to increase the supply of homes, we must strike a balance that protects individual homebuyers while still encouraging institutional investment. Without this balance, we risk exacerbating the housing crisis rather than solving it. The Minister for Housing’s comments about the need for foreign investment ring hollow when they are not backed by policies that make Ireland an attractive destination for that investment.
It is time for the Government to reconsider its approach to this issue. The housing crisis cannot be solved without private capital, and if investors feel unwelcome they will simply take their money elsewhere. The stakes are too high for mixed messages and confusion. We need clarity, consistency and a genuine commitment to fostering an environment where both homebuyers and investors can thrive.
The Government must decide whether it truly wants to attract the investment needed to build more homes, or if it will continue to send conflicting signals that risk driving investors away. The measures introduced in this week’s budget may be well-intentioned, but they are yet another indication that Ireland is becoming a less welcoming place for international investors – a message that, if left unaddressed, could have serious consequences for our housing market.
Clarie Neary is director of residential management and lettings at Savills Ireland
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