Financial executives moving to Dublin as Brexit looms face rising prices to rent or buy a home, as the Irish capital races to meet surging demand for houses and apartments.
When Ireland’s economy hit the buffers a decade ago, residential construction activity came to a halt. Now clusters of cranes are again visible on Dublin’s skyline as economic recovery takes the country towards full employment. But the property market is still struggling to catch up, creating a very tight market for renters and buyers.
“Obviously there’s a challenge around supply,” says Eunan O’Carroll, commercial director at Space Property Group, a consultancy. People moving to Dublin will “see prices in the rental sector that are at a par or maybe even a premium to what they would see in other cities such as London and Paris”.
Data from Ireland’s Residential Tenancies Board, which regulates the rental sector, show that Dublin monthly rents rose 9.5 per cent in the year to the third quarter of 2018. The average rent for all property types in the city was €1,620 per month in Q3, compared with a national average of €1,122.
But rental prices in Dublin’s fashionable docklands and other prosperous areas far exceed the city’s average. Two-bed apartments in Capital Dock Residence, a new luxury docklands tower block that is the tallest residential building in the city, command monthly rents of €3,300-€5,000. Still, Mr O’Carroll points to a lack of supply in the market. “People relocating to Dublin — young couples — are going to have to be prepared to live in out-of-town locations on the outskirts of the city,” he says.
At the same time, the arrival of institutional landlords has professionalised a sector previously dominated by sole traders and private investors. With construction activity again on the rise, groups such as Irish Life Investment Managers, Ires, Kennedy Wilson, Patrizia and Carysfort Capital have bought new apartment blocks in their entirety to cater for the expanding rental market.
The market to buy property is also constrained and those seeking a home loan soon discover that Ireland’s central bank enforces strict caps on mortgage lending. Introduced in the aftermath of the crash, the caps restrict borrowing through the use of loan-to-value and loan-to-income limits. Data from Ireland’s central statistics show residential property prices rose 7.1 per cent nationally in the year to November 2018, piling pressure on Leo Varadkar’s government to do more to increase the supply of new homes.
Dublin prices, which recovered faster after the crash than those in the rest of the country, have risen 96.1 per cent since their 2012 low point. Prices in the city rose 5 per cent in the year to November but the rate of increase has slowed.
Such trends have spurred concern about spillover for business as employees confront the rising cost of property. Ireland’s National Competitiveness Council, an official body that advises the government on economic trends, warned in a recent report that to facilitate business growth plans some companies have rented short-term accommodation to secure housing for staff.
The council said: “Increasingly, employers are faced with difficulties recruiting and retaining the necessary staff to facilitate growth plans due to accommodation issues for employees, particularly skilled workers from overseas. The state of the housing market in Ireland is regarded as one of the biggest concerns among business leaders of most regions and economic sectors.”
Martin Shanahan, chief of IDA Ireland, the state agency responsible for attracting inward investment, acknowledges the housing market is “problematic”. Yet he has been encouraged by the increase in construction activity.
“When one looks at commencement data, planning data, house completions, we can see it going in the right direction,” he told reporters in Dublin in January.
John McCartney, research director with estate agents Savills Ireland, says the gap between supply and demand is set to narrow as building work ramps up. “We think about 18,500 housing units were completed in 2018. So that’s about 29 per cent more than in 2017, which in turn was 46 per cent up on 2016.” In Dublin, another 35,774 new dwellings are either under construction or have planning permission in place.
“It’s quite likely that the demand for housing has peaked — and the supply of housing is rising fairly rapidly and is likely to continue doing so,” says Mr McCartney.
“As this gap narrows, we logically should see the rate of house price and rent inflation moderating — and indeed we already are seeing a slowdown in house price growth. However, this notwithstanding, demand is still likely to outstrip supply for the next two or three years.”
Stockbrokers at Davy agree. In a report for Myhome.ie, it said it expected prices to rise another 5 per cent in 2019 and that robust demand and rising incomes will continue to push house prices higher “once the uncertainty of Brexit has been resolved”.
Get alerts on Property sector when a new story is published