Cashing in on the property market
But, now that the Costas have gone Celtic and the Mediterranean market is awash in Paddies, the cuter Irish investors have switched their surplus euro to sterling and to residential and commercial property targets not far off our shores.
The UK is the current flavour for the sober investors who like to know their markets. We squirrelled well over €1 billion into investments in Britain in the past year, ranking as the third largest group of investors in that diverse economy’s property sector. It makes a marked change from going over and paving the streets of London with pick and shovel.
Want another contrast? Compare that staggering €1 billion-plus cash exodus with the €750 million or so put into Irish investments for the past year, and don’t forget that Irish cash is also going into Continental European investments as well.
About a further €200 million has gone to European investments in the past year, this market is expected to grow further as is the UK market, while lack of stock in Ireland is expected to see turnover in investment property dip during 2003, say CB Hamilton Osborne King.
A notable trend also in the year past was the level of private investor activity and the growth of investment syndicates, taking an increasing share of the investment market from the deeper pocketed institutional investors.
After the latest budget with stamp duty on commercial property transaction racked up a few more percentage points, overseas investments will have an increasing attraction but the Irish market will remain strong, say commentators.
Confidence in property as an investment vehicle held up because of several factors, but most of all because there were few other areas of investment open to those with money to put away.
Equities and dot.com investments have taken a bath, a cold shower and gone down the drain in other ways as well, while pension funds faltered and slipped.
With money at historically low levels to borrow it all made sense to go for safe and secure bricks and mortar - a familiar, tangible mix which always held an appeal for middle Ireland.
Bank lending to the real estate market is strong, both for investment purposes and for owner occupiers across nearly all fronts (offices and industrial are some of the less attractive options right now).
Buy to let and equity release schemes kept activity up at a high level on the residential scene.
On the house building front, figures indicate another bumper crop of new homes, with more than 50,000 new units completed during 2002 and plenty of building activity assured for next year which should help to slacken the rate of price inflation.
Most commentators expect some further residential price inflation next year, but considerably less than the 15-20% level witnessed in 2002.
According to the forthcoming Gunne Report and Homebond new housing figures, registrations in the country’s major urban centres were up significantly on levels in 2001.
In Dublin, registrations were up by 80%, Galway was up 92%, Cork was up 89%, Limerick was up 110% and Waterford was up 72% in the same period, all this in the vital urban areas where demand is greatest.
Of course, the picture isn’t all rosy. Irish house prices now average more than 200,000, which is a high level of entry for first time buyers. Local authority housing lists couldn’t be sated by even a full year’s new housing stock being handed over on a plate, while changes to the social and affordable housing provisions put many on waiting lists back further down a queue.
Nevertheless the changes to the two-year withering of planning permission will free supply and ease planning bottlenecks.
The replacement levy to be charged to builders in lieu of the controversial and bitterly 20% social and affordable allocation of new homes (opposed that is by builders, developers and to a lesser extent, by private buyers too) will encourage builders who had sat on the fence to buy and bring forward more land for development.
With supply coming back into closer equilibrium with demand, house price inflation should lessen: the delicate tipping of the balance can be seen already in the rental sector, where improved supply has seen rents actually fall back by 15-20% in some urban areas.
The new millennium has shown evidence of more maturity and macro-level planing in the country’s physical development than heretofore, along with more accountability in planning.
The National Spatial Strategy was finally published during 2002 and should be a yardstick for more balanced and orderly development in years to come.
Enormous schemes like Spencer Dock in Dublin got into gear late in the year, a sea change is occurring in residential design with an increasing acceptance of the need for higher density developments and more quality design, and Cork city has huge scope with its docklands future mapped out, waiting for the economic tide to turn back in its favour.
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