Irish Property Does Not Need to Roar

There are few words as loaded in meaning to Irish construction and real estate veterans as ‘Celtic Tiger’. Certainly, people emerged from that time as winners or losers; but in real terms, no one came through unscathed. With that in mind, very few will have welcomed The Irish Times headline yesterday which read: ‘Celtic Tiger poised to reawaken’. This article was based on a study of international house prices by the Economist magazine, which forecast that the Irish housing market is expected to outperform global trends over the next two years. The underlying strength of the economy is feeding the prediction that, by 2023, Ireland will be the top performer of the 16 global housing markets researched, including the UK, France and Germany. House-price growth globally is expected to average 0.7 per cent, with 1.6 per cent expected for Germany and 1.2 per cent house price growth expected in France. The Irish property market is expected to perform at multiple times the global average, with Irish annual house-price growth of about 2.5 per cent predicted.

House prices across the 16 countries studied rose by an average of 5.4 per cent in the 12 months to January 2021, but Irish house price growth was less than half that, at 2.2 per cent. However, in the 12 months to February 2021, prices rose by 3 per cent on average (4.7 per cent outside of Dublin). Q3 of 2020 appeared to kick off an unexpectedly strong period for transactions and, with the supply of second-hand homes at its lowest level since the boom era, this trend is expected to continue throughout 2021and into 2022.

The underlying strength of the economy – or ‘the fundamentals’ – is routinely used to justify Ireland’s outlier market performance but what exactly does that mean? The research undertaken by the Economist looked at Ireland’s employment rates and incomes levels, both of which remain strong, despite the pandemic. The study also considered the low level of household credit in Ireland, which is considerably lower than seen in comparable economies and appears to imply room for increased borrowings. Interestingly, the feature does acknowledge that Irish homeowners may still be scarred by the losses of the crash, however, it does not appear to understand the damage done by anti-investor sentiment and national policy in the intervening years. 

If it is indeed true that “the Celtic Tiger looks poised to reawaken”, then policymakers must prepare for a more sustainable feeding regime to stop this particular beast eating all in its path.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group