As we approach year-end, a clearer picture of Ireland’s property market is emerging. While the full impact of the pandemic on the market is yet unknown, some very clear trends are evident. On the residential side, a composite article in the Irish Times this week, with many leading industry figures contributing, suggested that price growth is likely to moderate next year, however, strong housing demand and ongoing supply issues are expected to “push high prices”. In fact, a new study has ranked Dublin among the ten most expensive cities in the world for housing, with first-time buyers now requiring deposits in excess of €50,000 – and apparently more than 40 percent of those are being helped through family ‘gifts’. It is difficult to see how this is sustainable. Yet, the private rented sector (PRS) is now the most active property investment sector in Ireland, attracting more than €7 billion from Irish and international funders and investors over the past five years. According to Hooke & MacDonald “there were more than 4,000 multi-family properties sold in Dublin in 2021 across 27 main transactions of more than €2 billion; approximately 90 per cent of these were new build properties and 10 per cent were existing stock”.
Similarly, the commercial property market has fared better than forecast and 2021 is on track to be the second strongest year ever with a sector take of close to €5 billion expected by the end of the year: “Albeit dependent on what transactions sign by year end, the outturn for 2021 should comfortably exceed €4.5 billion. Considering the headwinds experienced in the first half of the year, this is an excellent outcome”. Interestingly, hybrid working – which looks set to continue post Covid – has strengthened prospects for the office market. Business is booming for the industrial and logistics sector, with the shortage of zoned land driving competitive bidding. Even the hotel sector is filling with “renewed optimism for the year to come [as] tourism stands to benefit from the release of excess household savings across the globe”.
The mixed-messaging and ever-changing government policies were threatening destabilise the flow of inward investment, yet, CBRE is reporting that while 2020 and 2021 have been far from normal, the investment market remains “highly resilient” in the face of Covid challenge as international investors are drawn to economic fundamentals and attractive pricing. Critically, the market is still seeing new entrants across all real estate sectors, which is generally a good litmus test of core value and investor confidence globally. 2021 saw a move from forward-commitment transactions to some forward-funding deals (Ballymore’s 8th Lock to Union Investment), which is potentially transformative for the market, if this becomes a trend.
In terms of challenges, planning issues and “unhelpful interference” continue to impact on the timely delivery of new accommodation in the Irish market and a balance of fairness needs to be maintained. Perhaps 2022 is the year to achieve this?
Lotus Investment Group