Market Overview

Economic Overview

There is now a growing sense that, after a difficult period, Ireland’s economy is firmly established on a path to sustainable recovery. Reflecting the progress that has been made in rebalancing the public finances, and the improved perception of Ireland on global markets, the country exited its EU/IMF assistance programme in December 2013 without recourse to an emergency credit line. This confidence appears to be justified by the most recent national accounts data published in March 2014; GNP, which is the most representative barometer of activity in the Irish economy, expanded by 3.4% in 2013, with growth strengthening in the second half of the year. Meanwhile the labour market recovery which began almost two years ago has continued to gather momentum. In net terms 61,000 new jobs were created in 2013. This represents a growth rate of 3.3% in the year which is remarkable by international standards. Moreover, since the low point in Q1 2012, the private sector has been generating 4,600 new jobs per month on average in net terms. This appears to have continued into 2014 with the number of people signing onto the live register falling for the 28th successive month in March.

Demographic Overview

Ireland’s population grew by 8.6% between 2006 and 2013. Just over one quarter (27%) of the country’s population now lives in Dublin, resulting in a population density of 1,378/km2. This compares with a density level of just 20.37/km2 outside the capital. Distinctive features of the Dublin demographic structure include;

  • The highest percentage of people in Ireland in the 25 – 64 age group (58% vs 54% nationally and 53% outside Dublin)
  • High prevalence of apartment dwellings (24% of all housing units vs 11% nationally and 6% outside Dublin)
  • Lowest housing vacancy in the country - 3.3% vs national average of approximately 8.5%
  • 36% of dwellings in Dublin area are rented vs national average of 29%
  • Lowest rate of housing completions of any Irish city over the 2002-2013 period – 96 per 1000 of population vs 125 per 1000 nationally;

Socio-Economic Indicators

The Dublin area has a distinctive socio-economic profile;

  • Annual disposable income per person in Dublin is over €2,000 higher than the national average
  • Proportion of people with 3rd level qualifications higher in Dublin (36.3%) than the national average (29.1%) and average outside Dublin (26.1%)
  • Dublin has below average unemployment rates (10% in Q4 2013 vs 11.7% nationally)
  • Dublin has the highest percentage of people in Ireland classified in the professional and managerial categories.

Pricing: Dublin vs Outside Dublin

The Dublin area has a distinctive socio-economic profile;

The lack of new supply, allied to low and declining vacancy rates across all four local authority areas in Dublin, is leading to a strong recovery in residential property prices in the capital. Dublin accounted for approximately 35% of residential sales in 2013 and, according to the CSO house price index; prices have risen by 13.3% in the year to February 2014. However, Savills’ view is that the technical properties of the official index mean that it probably understates the true rate of price growth.

Outside Dublin, residential prices have been slower to recover. This notwithstanding, since the beginning of 2014 values in the regions have also begun to solidify.

Pricing: Houses vs Apts in Dublin

As shown below, there has been little difference in the trajectory of house and apartment prices in Dublin in recent years. Given very low vacancy rates, demand for both types of accommodation is outstripping supply, and the latest data indicate that the price of both housing units and apartments is rising at double digit rates. As the Irish population ages there is an argument that the weight of demand in some suburban locations is likely to shift towards family homes. However, in town-centre locations, and in locations that are well served by public transport infrastructure, the demand for apartment-type units will remain strong.

Pricing: Value of Transactions in Dublin 1, 11, 12, 18

The Portland Street area, Finglas, Drimnagh and Sandyford area are within Dublin 1, 11, 12 and 18 respectively. The average value of transactions in these postcodes in 2013 was €220,514. This represents a 6.4% premium on the national average (Incl. Dublin) and a 54.6% premium on the average value of transactions outside Dublin.

Irish Residential Market Overview

Ireland’s residential property market is now established on the path to recovery. In terms of transaction levels, approximately 29,000 dwelling units were sold in 2013 – a 15% increase on the previous year and a 58% increase on the 2011 figure.

On the demand side of the market, Ireland’s population has increased by 360,000 people since 2006. However, supply has not kept pace with this rate of growth. To illustrate this, only 8,301 housing units were completed across Ireland in 2013, compared with a figure of 88,419 at the peak of the market in 2006.

Rental Market

There is a strong tradition of owner-occupation in Ireland. However, between 2006 and 2011 the number of private rented dwellings nearly doubled from 145,317 to 305,377. This shift from owner-occupation to the private rented tenure ensured that rents declined relatively modestly during the economic crisis when compared with the fall in capital values. As a result, yields on residential property have risen significantly in recent years, particularly in Dublin where the decline in capital values during the crisis was steepest. Latest data from the Private Residential Tenancies Board show that, driven by very low vacancy rates, rental growth in Dublin is accelerating. Indeed, the latest data show that residential rents in Dublin rose by 7.6% in the year to Q4 2013. This has helped to dampen any yield compression arising from the strong recovery in capital values, and has underpinned strong demand for residential investments.

Rental Prices in Dublin 1, 11, 12 and 18

Dublin 1, 11, 12 and 18 have all experienced double-digit percentage rental prices increases since Q4 2010. Taking these areas together, rental prices have increased on average by 14.3% in the last 3 years.

Hooke & MacDonald

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