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Dublin property investment update

The Dublin property market has seen a surge in interest in the last six months from European buyers who are keen to snap up sound property investment opportunities there. This is a market that has received little publicity in Asia and is not on the property investment radar of most investors based in that region. So are there sound opportunities in the buy to let market that our clients can take advantage of?

Ireland’s economic problems have been well documented and they are certainly not going to go away in the short term. Nevertheless, the country’s approach to solving its problems has been warmly applauded by its fellow EU members. It may have got itself into a mess, but at least it is taking the painful steps necessary to get itself back on an even keel. It will take time, but the Irish government at least has the political will to do it whereas may other European governments haven’t.

The property market has been a victim of the country’s woes, although some would argue it was partly the cause. Prices sky-rocketed in the mid 2000’s fueled by cheap money, speculative building and lax lending from financial institutions. Sounds familiar? The USA and Spain are classic examples of markets that fell into that trap. The result of the 2007/8 crash in Ireland was house prices falling by around 35% and the banking crisis resulting in housing loan approvals falling by over 70%.

Since the crash the market has continued to trend downwards and house prices in Dublin are now 56% lower than at their peak in 2007. Apartments have fared even worse, with priced down over 60%. Despite nominal growth in the last few months, the market reverted to type in June and fell again to show a fall of 16% over the past twelve months.

Trying to put a positive spin on the situation, one commentator said ‘So far this year, we’ve seen varied reports on house prices in Ireland but this official record should provide more certainty for investors. The fact is that while residential house prices have declined slightly more in the year to 2012, the levels of decline are broadly speaking, stabilizing.’ That is an interesting way to view the market in our opinion. It may keep falling, but at least it is only at 16% a year?

The possible collapse of the Euro and the effect this would have on the market is certainly an issue for Asian investors. However, it doesn’t seem to concern many Europeans. They are taking the approach that over the medium to long term prices will recover and buying at or near the bottom of the market is always a sound strategy. That is not to say we are near the bottom of the market though. Many investors are sitting on the sidelines waiting for firm evidence that the market has bottomed. Others will look for the first signs of growth before they invest. Even if the bottom of the market is close at hand, it could bounce along at depressed levels for some time. The general economy is unlikely to rebound strongly any time soon so it could be a bumpy ride for investors jumping in now.

Still, estate agents are telling us there is a shortage of product in and around the Dublin city centre and sales levels are picking up. If you are very brave you could enter the market now or you could adopt a more cautious approach and wait until later in the year or even next year. Our recommendation would be the latter. Property investment in Dublin is a sound strategy, but perhaps not just yet.