Irish Property 2020: Understanding our starting point

The most recent Ulster Bank construction purchasing managers’ index (PMI) was published earlier this week, showing an increase in both commercial and residential development activity across the Republic of Ireland. This is welcome news for the industry after a three-month slowdown in the latter part of 2019. Construction work on public projects is still in decline, however, the pace of decline appears to be slowing. As previously explained, the PMI benchmark is 50, with any figure above that indicating growth. The index reached 52 in December, up from 48.2 in November. Significantly, this is the first growth recorded since August 2019. Greater clarity around Brexit appears to be one of the main contributory factors to the overall improvement. According to Ulster Bank, builders are more confident about the future now than they have been for six months. Here at Lotus Investment Group, we are seeing that confidence translated through increased enquiries and early progression of previously stalled projects.

That is not to say that the industry is not still facing challenges. Labour shortages, from site to c-suite level, are playing havoc with future planning and onsite programme schedules for many contractors. According to Irish Building Magazine, salaries across the construction sector have continued to rise over the last 12 months. Most construction firms are still experiencing increased competition to attract key team members, particularly affordable, early/mid-career professionals like quantity surveyors, engineers and project managers. Staff retention is also a massive issue, with headhunting rife within the industry right now. This is an important project  risk for design and build teams to be aware of and take steps to mitigate against.

On the residential side of the market, property prices nationwide increased just 1.4 percent from November 2018 to November 2019, according to the latest Central Statistics Office figures. Significantly, property prices along the border increased almost 10 percent, making these counties the best performers in the marketplace. Honing in on the Dublin market only, we can see that prices actually fell by 0.7 percent over the same period. The slowdown in property price growth can be linked to the pick-up in new homes supply (up 18 percent from 2018 to 2019). Also, while speaking to the Irish Times, chief economist with KBC Bank Austin Hughes stated that “The behaviour of property prices in the past couple of months offers tentative evidence that the drop in Irish property price inflation may be bottoming out”. To put all these figures in context, national property prices have now increased 85.7 percent since the crash, while Dublin prices have recovered 94.9 percent.

Finally, it is worth noting that Irish mortgage lenders are expecting to loan €9bn to homebuyers in 2020. As always, we would be interested to hear about local or regional trends impacting your market.