Within the next few months, we will be marking – or celebrating – a decade of property data in Ireland. While for many, it will not feel like 10 years since the initial publication of the Property Price Register, for others in the industry it is probably inconceivable to imagine valuing properties and interpreting residential market trends without knowing the achieved sale prices of similar neighbouring properties. Yet, that is exactly how the marketplace operated.
It stands to reason that with more data comes more accurate insights, which allow for more accurate forecasting, and therefore, more accurate decision-making… But is that the reality? Knowing the facts does not change them.
Earlier this week the Irish Independent reported that €1.7 billion had been “pumped into” Irish apartments last year by institutional investors. The figure was extracted from the latest Sherry FitzGerald report, which emphasised that the bulk of residential investment was used to fund the construction of apartments rather than houses. In fact, 2021 was one of the biggest years for investment in residential property, second only to 2019 when €2.9 billion was invested into the sector.
In total, the Irish property market attracted €5 billion in investment last year; €1.5 billion went into office space and €1 billion went into industrial properties. Interestingly, the portion of forward-funding investment jumped from the five-year average of 49 percent, to in excess of 70 percent, which is telling. In real terms, this equates to more than 4,000 apartments being paid for through forward investment. What impact is this having on the viability conversation and how that relates to affordability further down the chain? There can be no doubt about the critical importance of the PRS right now and its role in bringing new stock to the market; however, the point was made in the Hooke & MacDonald report published last week that current high rents will need to be maintained (and continue increasing) in order to sustain this flow of new PRS supply. Currently, rents continue to rise and the annual increase – February 2021 to February 2022 – is 9.2 percent, which was driven primarily by low supply and delays in new supply coming to the market. It is not clear how sustainable this will be in the face of touted policy changes under a possible new government. The Sherry FitzGerald report noted that investment yields are expected to narrow this year, and there was a particular note about the as yet uncertain impacts of the war in Ukraine.
The known knowns at this point are that even if housing delivery targets are met, supply will continue to lag behind demand; and the European Central Bank looks set to raise its key lending rate. The most challenging unknown facing the industry is the stability of the supply chain. In simple terms, there is demand, finance, and State appetite for greater residential delivery, now attention must turn to supporting and enabling the construction sector to deliver.
Beannachtaí na Féile Pádraig
Lotus Investment Group