Rising costs deter apartment investors, says Glenveagh chief

Rising costs and interest rates are deterring investors from backing apartment building, threatening such projects’ viability, says Glenveagh Properties chief executive, Stephen Garvey.

Forward funding, where institutional investors agree to buy apartment blocks before they are built, has helped to finance their construction in the Republic in recent years.

However, Mr Garvey warned on Wednesday that rising costs and borrowing charges have slowed the rate at which investors were agreeing to back apartment development.

“It has probably reduced dramatically over the last couple of months,” he said. “The viability of apartments is now more challenging.”

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The Government regards apartments as part of the solution to the housing crisis, particularly in cities, where the State’s Croí Cónaithe scheme is meant to help underpin the viability of such projects, which are more expensive to build than other dwellings.

Glenveagh’s urban division, which focuses on apartments, sold a block of 554 homes on Dublin’s East Road last year for €63 million to investor Eagle Street.

The unit has agreed forward-funding deals for apartments on several other sites in the capital, where it is building 300 in all.

Mr Garvey was speaking after Dublin-listed Glenveagh published results showing pretax profits grew 38 per cent last year to €63 million from €45.7 million in 2021, aided by strong house sales.

Revenues rose 35 per cent in 2022 to €644.7 million from €476.8 million the previous year. Earnings per share advanced 69 per cent to 7.6 cent a share last year from 4.5 cent in 2021.

Glenveagh’s suburban division, focused on house building, sold 1,354 new homes in 2022, beating the previous year’s 902 total by 50 per cent. So far buyers have reserved 803 homes for this year.

That part of the business grew revenues by 64 per cent to €455 million. Glenveagh sold its houses at an average of €330,000, 7 per cent better than the €308,000 price they fetched in 2021.

Glenveagh and rival Cairn Homes want High Court judges to review Kildare and Wicklow county development plans, arguing that both local authorities cut back on the number of new homes they will allow at a time when more are needed.

Mr Garvey did not comment on whether the company intended seeking further judicial reviews of other county development plans.

The group is working on 21 sites and plans to open five more this year. Glenveagh says the long-term outlook for the Irish housing market remains positive.

Mr Garvey noted that planning authority An Bord Pleanála had stepped up activity this year.

Glenveagh got permission for two developments through the new Large-scale Residential Development process, which replaced the strategic housing scheme, which left many proposed projects mired in litigation.

The company last year sought permission for 3,600 new homes. It made five applications under the new scheme, which it said appeared to be working well.

Overall, Glenveagh has planning permission for 5,000 homes, including 3,500 houses.

In a statement, Mr Garvey said the company was in a “very strong position” to continue growing its business and boosting profits.

“But the fact remains that we are capable of building many more homes if the Government matches its ambitions on much-needed planning reform with the decisive and meaningful action that Ireland’s accommodation crisis warrants,” he argued.