The Irish property market has been fairly buoyant over the last few months with an array of positive reports and forecasts for the short-term future. This is certainly a big change from the situation just a couple of years ago when the country was bailed out by European partners amidst concerns it was on the verge of bankruptcy. However, it is worth noting that the Irish government is ahead of the expected financial recovery timetable and indeed property prices are reflecting this.
There were serious concerns that the Irish economy would remain friendless and the Irish government would struggle to raise much-needed capital in the financial markets. The short-term outlook appears to be very positive for the Irish real estate market but what about the outlook for 2015?
Irish property in 2014
The very influential credit rating agency S&P has forecast that Irish property prices will increase by around 3.5% during 2014 which is pretty much in line with recent industry predictions. When you bear in mind the recent problems encountered by the Irish government and the Irish economy, an increase of 3.5% in 2014 is certainly no mean feat. However, while many property investors may be looking forward to the future in anticipation it seems that 2015 could be a particularly difficult year with S&P forecasting just a 2% increase in property prices.
Quote from PropertyForum.com : “While bearing in mind that London is one of the more popular property markets in the world, talk of ghost towns within London seem to be very strange on the surface.”
It is interesting to see that 2013 ended with Irish property prices up for the first time in six years although still 47% below the 2007 peak. On the surface this would seem to indicate further room for growth in the property market but why is S&P cautious about 2015?
Negative equity and reduced mortgage finance
Whether or not you could describe the ongoing recovery in Irish property prices as a recovery from an oversold position is debatable but the problems of negative equity and mortgage finance availability still lurk in the background. The likes of S&P believe that these two issues in particular will hamper the ongoing recovery in 2015 although in reality the economic situation could look very different in 12 months. So, there is cautious optimism for 2014 and a little more caution for 2015 but as we have seen in recent times, the situation can change very quickly.
We only need to look at the UK market as a whole to see the ongoing recovery in property prices, the economic recovery and growing confidence in the business arena. It will take some time for the Irish situation to reflect that of the UK due to the fact that the Irish economy sank significantly lower than its UK counterpart. However, the Irish economy is fighting back, the Irish government seems to be back on an even keel and the banking sector is slowly but surely recovering.
There may be some way to go, there may be problems ahead but confidence is growing in the Irish real estate market. Whether it will pause for a breather in 2015 remains to be seen but if you take a step back, perhaps it is sensible to be a little cautious at this stage of the recovery?