In a recent report, the International Monetary Fund (IMF) has confirmed what many of us have suspected for some time – that Dublin has experienced one the strongest growth in property prices in the world. To be precise, Dublin real estate increased in value faster between 2013 and 2018 than in all the 32 countries and cities surveyed by the IMF.
The Washington-HQ’d organisation ranked Dublin at top of its league table, with an average growth rate of over 10% per year. It found that rate of real estate price increases in Ireland not only outpaced that of major real estate investments such as Tokyo, London and New York, but also that other cities that have experienced similar property booms over the period, such as Auckland, Sydney, Toronto and Oslo.
Investment fuelled by foreign funds
The ongoing housing crisis and rising rents have helped make Dublin one of the most attractive cities for real estate investors from all over the world. Back in December 2018, PwC ranked Dublin as the 3rd hottest city for real estate investment by global investors, just behind Lisbon and Berlin. It is thought that the accelerated expansion of the Dublin-based tech multinationals is helping to push demand for rental accommodation far beyond current supply levels. Most industry insiders agree that the situation is compounded by Brexit, which has seen Dublin benefit as one of the most sought-after cities for office relocations by UK-based companies wishing to remain trading in the European Union.
The influx of foreign investment into Ireland’s commercial and residential property markets has led to some commentators calling on the Government to restrict the purchasing power of these funds. There is growing concern that so-called “Cuckoo Funds” – or Private Rented Sector (PRS) funds, which are often backed by large institutional investors and specialise in buying large apartment blocks and renting them to residential tenants – are making the housing crisis worse by skewing the markets against first-time buyers.
However, others argue that these funds are actually part of the solution for solving the crisis. They point out that Ireland doesn’t have a housing crisis but an accommodation crisis; in other words, the country simply does not have enough of the right kind of accommodation available. In particular, the massive surge in demand for suitable rental properties is not being met by the country’s existing (and ever shrinking) rental stock, a problem which cannot be remedied simply through building more houses. To get a sense of just how acute the rental market challenge is, consider this: striking figures recently released by the Daft.ie property search website revealed that the number of homes available to rent across the country is at its lowest level in 13 years, with just 2,700 homes (!) available to rent nationwide on May 1st 2019.
It is clear that major investment is required in growing and improving Ireland’s rental stock, particularly in high-demand city centre locations. Failure to tackle to the crisis will soon harm the country’s international competitiveness and endanger future expansion plans by the tech multinationals that rely on a relatively young and mobile workforce.
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