€25.5bn flowed into property market in 2023

Cork and Galway both witnessed an influx of capital into commercial property during the year. Picture: Tom Coakley

Financial capital worth €25.5bn flowed into the Irish residential property market last year, according to estate agents Sherry FitzGerald.

The figure was 6% below the €27.2bn recorded in 2022. The drop came despite the significant rise in borrowing costs throughout much of the year. SherryFitz said its reflects the resilience of demand in the residential market. 

The report shows that, in contrast, capital flows into commercial property, development land sales and agricultural land sales, contracted by a significant 41% during the year to reach €2.6bn. Notably, direct investment into commercial property fell to €1.4bn in 2023 from €2.7bn the previous year, while development land spend more than halved to reach €392m in 2023.

Dublin saw its share of capital flows decline to 46% in 2023 to reach €11.7bn, reflecting reductions in both residential and commercial spend. In contrast, the regional centres of Cork and Galway both witnessed an influx of capital into commercial property during the year, while residential spend in these locations also increased. Cork accounted for the highest portion of capital flows outside of the capital at 10% or €2.5bn. Galway absorbed a further 4% to reach €972m. Limerick recorded a decrease in capital spend across both residential and commercial property compared to the previous year to reach at total of €615m.

"Across the State, the impact of funding difficulties, rising construction costs and the sustainability requirements for commercial buildings has resulted in significant stranding of assets in the main streets of provincial towns," Brian Carey, Commercial Director, Sherry FitzGerald said.

"Underutilisation and dereliction issues are a significant problem for many of these commercial buildings. Sherry FitzGerald are involved in a number of bodies currently liaising with government departments to highlight these issues and provide potential solutions that could help improve viability and reactivate these buildings in the commercial SME sector in town centres and cities across the country.”

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The estate agents said the outlook for 2024 is positive as the economy returns to more moderate rates of growth, while the recent interest rate cut announced by the ECB will help restore confidence to the market. 

Residential spend is expected to remain robust in the year ahead while the recovery in the commercial market is likely to be tentative as the office market, which continues to see strong levels of vacancy, may take longer to recover. Demand for industrial & logistics and retail space however, is expected to remain strong while the hotel sector is predicted to see a record year for capital flows.