At this moment in time it seems as though the sky is the limit for the Dublin property market. Despite talk of a “soft landing” Irish house prices are forecast to increase by 9.5% this year, 8% in 2019 and 7% in 2020. According to figures from S&P this would deliver a 127.9% increase in Irish house prices between 2013 and 2021. However, should investors be cautious in light of the pre-2013 Irish house price collapse?
Dublin housing market
It is fair to say that the Irish economy is booming at the moment. Current economic growth is the fastest in Europe and levels of unemployment are below the EU average. For many people the 2008 financial crash, and the subsequent political/financial mismanagement associated with the Irish government, is but a memory. The reality is that house prices fell by 55% during the period between 2008 and 2013. The country also needed a financial bailout from the European Union to continue – although the funds were repaid early.
While many in the UK are becoming bored with Brexit – and the constant rumours and counter rumours emanating from political parties – Dublin has benefited. We have seen a number of financial giants leaving the London market to set up new headquarters within the European Union. We have also seen high flyers ditching their London houses and reinvesting across Dublin. Even if the UK government was to negotiate a “near-perfect Brexit deal” we will likely see further movement of companies and employees to Dublin.
Over exuberance amongst developers
The main danger to the Dublin housing market is over exuberance amongst property developers. Recent data shows a doubling of successful planning applications for apartment units in the first three months of 2018 compared to the previous year. Even with the best will in the world this is phenomenal growth and there must be a danger of flooding the market with new property. Whether we are quite there at the moment is debatable but that kind of continued growth is impossible for the market to absorb.
Predictions of a soft landing, again
Prior to the 2008 worldwide economic crash the Irish economy was moving like a steam train. The government was handing money back to the people, funds were being put aside for new born babies and the property market was booming. There was even talk that the Irish economy would override the worldwide trend and remain relatively stable. Unfortunately, these hopes were optimistic to say the least and once the cracks started to appear the economy tanked and house prices followed.
It may well be down to the authorities to restrict the number of successful planning applications in the short to medium term. Due to the lag between lodging a planning application and actually building and selling a property, it is difficult to see where the economy will be at the end of this process. History shows us that property development trends are often extended, over and above the peak of the market, and oversupply can lead to a sudden about turn in fortunes.