Property Market Q2: On Track for a Challenging yet Opportunistic Quarter 

It has been another few weeks of mixed market commentary, kicking off with a welcome vote of confidence from international investors, as highlighted by Cushman & Wakefield’s global survey. Ireland continues to rank highly as a preferred location for investment within the EMEA region, driven by its positive demographic backdrop and robust economic growth outlook. Almost half of investors surveyed cited supply/demand dynamics and outlook for rents as being the key attraction for them, while a further 32 percent cited population growth and other demographic factors. Significantly, only 19 percent cited Ireland’s economic growth outlook as the reason for their interest. Investors expressed concerns about some of the ongoing challenges in the Irish market, with 53 percent citing rent caps as a current barrier to investing. Interestly, political interference and planning issues were cited as issues of concern by 14 percent and 12 percent respectively. 

Unsurprisingly, the focus remains predominantly on the Dublin market, yet the broader appeal signifies untapped potential in cities like Cork, Galway, and Limerick. This is something the team within Lotus Investment Group are acutely aware of and we are speaking to homebuilders across the regions to unlock this potential. There is a significant opportunity for homebuilders and developers to diversify and expand their portfolios beyond the capital, capitalising on a market ripe for growth in the entire range of living segments such as affordable housing, purpose-built student accommodation, and senior living, as well as private housing for the sales and rental market.

However, this optimistic outlook is tempered by the stark reality presented in the Knight Frank report, which details a dramatic 70 percent plunge in investment in Irish residential property, falling to just €300 million last year. The report paints the picture of a market seized by higher interest rates and heightened debt costs, leading to a standstill in activity among institutional investors. This contraction in investment comes at a time when the demand for new housing remains critically high, with an estimated 58,000 new homes needed annually to meet the country’s housing demand – a target far beyond the current output rates. Regional home builders need to step into the breach, and quickly. The government’s acknowledgment of the disparity between housing targets and actual needs adds a sense of urgency to this – you might recall the confidential memo to the Finance Minister over Christmas that warned of targets significantly below the demand. The Knight Frank report commentary said it was clearly evident that Ireland’s housing policy needs to accommodate a wide variety of occupiers, across different age categories and buyer profiles. The report further breaks down the 58,000 demand into 32,000 new builds for first-time buyers, 9,000 for right-sizers (those trading up or down), and approximately 10,000 homes for senior living (public and private). In addition to this, it is estimated that 4,000 student beds are needed every year. 

Is the construction sector ready to scale regionally?

As we make our way into Q2, it is clear that while the challenges to housing delivery remain, so too do the opportunities. 

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group