Real Estate Update: Themes Dominating the Property Market in 2019
24 January 2019
Supply and demand
Threats and opportunities abound. The housing crisis will sadly continue to impact the lives of those living and working in Ireland. Great swathes of new developments will bring greater supply in 2019. Unfortunately, however, this will still not be enough to quench demand and affordability will be a constant refrain.
The relative strength of the Irish economy, compelling demographics and strong occupier demand must be balanced against concerns relating to construction costs and capacity as well as the threat of global macro economic shocks.
We have seen a dramatic shift by property investors to residential assets. The Private Rented Sector (PRS) is no longer niche and is now very much an institutional safe haven for new and existing stakeholders. Consequently if a development is in the right location, developers are now choosing to sell by way of PRS sale rather than individual sales.
In the office sector, we are seeing the shift towards co-working, and indeed co-living, which is being driven by technology, urbanisation and changes in how we work.
Impact of taxation
The world’s leading technology companies significantly expanded their footprint in Ireland in 2018. This has been driven in part by changes in US and OECD tax codes.
The continued drive of the OECD and EU to align the taxation of profits with substance and economic activity has encouraged major corporates to expand their Irish real estate footprint. With Ireland having a relatively low corporate tax rate of 12.5%, the desire of many foreign tax authorities to challenge the amount of profits liable to tax in Ireland instead of overseas has increased. A key defence to these challenges is to demonstrate physical infrastructure and thereby real estate in Ireland, from which business is conducted by major workforces based in Ireland. Hence, in 2018, Facebook, Google, Salesforce and other major groups increased their real estate foothold in Ireland.
This influx has created a parallel requirement for more rental housing for those employees, which is feeding the housing crisis further.
With the ending of the ECB stimulus programme, the second half of 2019 will likely see an increase in interest rates. Other major economic factors will include the Brexit effect. This will likely see the Dublin property market benefit as one of the most likely alternative back office locations.
The housing crisis in Ireland is acute and represents a major challenge for all market stakeholders. All possible steps must now be taken to increase supply and affordability. These measures need to include the adequate delivery of social housing, the removal of planning delays and further incentives to encourage greater numbers of landlords and developers to invest and build. If we can tackle this complex problem, the other portents for the property market in 2019 are good.
The content of this article is provided for information purposes only and does not constitute legal or other advice.