Donald Trump

13 Nov 2019

IRES REIT: Another large PRS portfolio transacts

Avestus Capital Partners is set to acquire a portfolio of 382 rental apartments across two developments in south Dublin for €214m, according to this morning’s Irish Times.

The Vert platform, an established and fully operational PRS portfolio spread across Honeypark in Dun Laoghaire (197 units) and Elmfield in Leopardstown (185 units) was offered for sale in September by Tristan Capital Partners/SW3 Capital guiding €200m and the sale price represents a 52% uplift on the cost of assembling the portfolio in 2017/18. The transaction represents the most significant acquisition in the sector for Avestus, which raised €160m of equity in July 2018, and is the latest sign of strong investor demand in the PRS sector. Knight Frank recently estimated that demand for assets in the PRS sector is in the region of €4bn. 


Irish homebuilders/economy: ESRI finds house prices are in line with fundamentals

In advance of its conference on the Irish housing and mortgage market, the ESRI has published research on the sustainability of house prices in Ireland at a regional level. The research uses more granular data that has only been available in recent years and expands the discussion on the housing market.

In short, the ESRI concludes that the market is “well explained by fundamentals” at present and “appears close to equilibrium”, although it notes that this situation can change rapidly. One of the key indicators in the ESRI’s assessment is the residential rental yield (depressed yields can indicate that asset values are moving out of line with cash flows from the assets) and it is interesting to note that the national average yield remained relatively stable between the trough in the market in 2013 and last year, declining by just 1.1 percentage points nationally and by 1.0 percentage points in Dublin, from 5.3% to 4.3%. Another interesting finding is that the picture of house price sustainability does not vary across counties as much as one might assume. Although some county outliers do exist (the data from some rural counties suggests, unsurprisingly, that prices there have not experienced the same level of post-crash recovery), a majority of counties are in line with national averages, including Dublin. Indeed, the authors note that this co-movement across counties may be explained by household mobility in a relatively small country, something that chimes with anecdotal evidence.

As well as providing evidence that house prices are not out of step with economic fundamentals, the relative stability of rental yields (both over time and regionally) suggests, to us, that housing undersupply is impacting both rental and purchase markets in a similar fashion – not that this will be a surprise to many.

UK election polling points to comfortable Tory lead

YouGov has released the results of a poll for the Times, which was the first to take account of Mr Farage’s decision to pull out of 317 seats which the Tories won in 2017. The poll asked voters just about their intentions to vote based on parties actually standing in their constituencies. It put the Conservatives on 42%, Labour on 28% and the Liberal Democrats on 15%, a Tory lead of 14%. 

YouGov also did the poll asking voters about their voting intentions, had all parties been standing; that put the Conservative party at 39%, with a slightly smaller 13-point lead over Labour. The poll adjusted for parties standing was the first to have the Conservatives on more than 40% in a YouGov national poll, since the official launch of the Brexit party in February. 

Farage under pressure

This appears to add to the pressure on the Brexit Party leader Nigel Farage to stand down candidates in other marginal constituencies which the Tories have a chance to win. With the deadline for candidates to submit their nomination forms Thursday at 4pm, Mr Farage has little time to decide how he plans to move forward. 

Meanwhile, sterling has held onto much of the rise that came after the news of the Brexit party standing down candidates in Tory held seats. This was because this was seen as boosting their chances of a majority and therefore the passage of Mr Johnson’s Brexit plan through Parliament, which consequently reduced the risk of no-deal at the end of January. Sterling is hitting multi month highs versus the single currency with the benchmark EUR/GBP rate currently sitting pretty at 0.8670, levels not seen since early May. 

Trump trade comments

In an annual speech to the Economic Club of NY yesterday, US President, Donald Trump, said that the US was close to signing a ‘Phase 1’ trade deal with China but that he would only accept a deal which was good for the US and its workers. He also warned that failure to reach an accord would result in the US substantially raising its tariffs on Chinese imports. Furthermore, he criticised the EU for its trade policy, claiming that it has set up ‘terrible barriers’ that in some ways are worse than China’s. 

The tone of the President’s remarks unnerved stocks somewhat. Although the S&P 500 ended 0.2% up on the day, the index weakened after the speech and Asian markets were generally in the red overnight, with the Nikkei down by 0.9% and the Shanghai off by 0.3%.

Economic Releases

UK 09.30 CPI

EU 10.00 Industrial Production

US 13.00 CPI

US 16.00 Powell testifies to congress