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Where now for the Irish Property Market?

As the rest of the economy enters recovery, sovaldi what of Ireland’s tumultuous property market for 2014?

The Irish economy is showing signs of life again, cialis with many of the key metrics with which we view economic health illustrating the nation’s steady emergence from the worst per capita financial crisis in developed world history. The construction sector is (whisper it) on the rise again, capsule with growth in output of 11.7 per cent in the year to June. Over the same period, unemployment fell from 15.1 per cent to 13.3 per cent and Irish 10 year bond yields dipped below sub 4 per cent, the best in class of all the European bailout countries. Crucially, Ireland has met its 2013 current deficit target of 7.5% per cent, putting the public finances back on a sustainable footing with the country on the cusp of regaining economic sovereignty. However, with the country’s labour force so reliant on building and construction, the performance of the Irish property market remains as fundamentally important as ever to national prosperity.

Residential

The Irish Residential market is one of two tiers; capital values and rents are rising in Dublin but in decline in the regions. Up to now, Dublin prices have fallen by 55% since 2007, as opposed to 48% for the rest of the country, but also due to the relative attractiveness and productivity of Dublin property. The Dublin market has seen rents increase by up to 10% in 2013, primarily due to a scarcity of houses in popular central and urban areas, according to a recent Daft.ie report. This shortage is pushing up rental yields (the percentage of total property value earned by the investor through rental income) on prime residential property (property in the most financially lucrative locations).

UCD students are most affected too. Savills have reported price increases of up to 20 per cent in a collection of prime residential neighbourhoods in south Dublin. This arrival of inflation may trigger some potential buyers into acting now, a development being factored in to the majority of large estate agent outlooks for 2014. Indeed, UCD students may turn to on-campus accommodation as a safe haven from rent price hikes in the coming years.

International Interest

Ireland has seen a surge of international investor interest in the office, industrial and retail markets since the downturn. Prime office space in Dublin is yielding investor returns of up to 12 per cent as of October 1, while those with holdings in industrial and retail property in prime Dublin locations can expect returns of 17 per cent and 12 per cent respectively. This compares favourably to the 3.62 per cent return on Irish 10 year bonds and the meagre 2-3 per cent returns for savers in Irish banks. The figures prove even more appealing given Ireland’s low inflation rate of 0.2% according to the CSO. With a range of retail and residential property portfolios coming on the market in recent weeks, interest in Irish property has become a main focus of the global investor community, particularly among top asset managers and private equity firms. This increased appetite for Irish property is correlated to the extra liquidity in global financial markets, but also to renewed confidence in Ireland as a credible investment location after swallowing a five-year long austerity pill and eradicating our financial illnesses.

Outlook

Market consensus points to sustained interest in Dublin’s prime property across all property classes. Due to a scarcity in prime industrial and commercial property in Dublin’s business districts, one can foresee either a return to speculative development in the Capital (what with the increasingly attractive returns to investors and lenders) or an increase in demand for new locations in the secondary Dublin market and prime regional locations in Cork, Limerick and Kildare. This commentator predicts the former, with the likely emergence of another property bubble, confined to the prime Dublin market.

Contrast both the emergence and dangers of the booming Dublin market with the continuing mortgage and negative equity crisis countrywide and the contradiction that is the Irish property market becomes even more compelling. All of Ireland’s notorious developers seem to have moved on from Irish property. A return to the property game for many of them would be impossible in any case. The next year will likely deliver a new wave of capital into Irish property, the result of which all of us ought to monitor.

Shane O’ Brien

 

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