MarketAnalysis: The Irish economic fundamentals, driven by strong consumer spending growth, look set to boost the property market during 2005, according to an assessment by Hamilton Osborne King. But fortunes are mixed across the eurozone and the UK market remains uncertain.
Consumer spending grew by 3.2 per cent in 2004 but the prospects are more upbeat for 2005, according to HOK, with spending growth expected to exceed 5 per cent. Consumer confidence in turn supports growth in the retail sector and also the office sector.
"However, with the economy continuing to strengthen and with strong growth in the property market, there is little doubt that infrastructure will continue to severely lag the economy and development," stated the company's managing director, Paul McNeive. "The lack of a conference centre and a second terminal at Dublin Airport continue to cost us dear."
HOK predicts that the Irish investment market will top €1 billion this year.
"Market availability is at its lowest level in over five years and the number of transactions in the first quarter of 2005 is down on previous years," its analysis suggests. "However, there are a number of highly significant transactions currently under negotiation and, when finalised, these transactions will add significantly to turnover."
It indicates that prime retail yields are 3-3.25 per cent in general but high street shops in Dublin and other urban centres are typically yielding 4-5 per cent, with sought-after shopping centres nudging this to 5.5 per cent.
"The outlook for the Irish investment market for 2005 remains extremely positive," the assessment indicates. "We expect that intense demand for good quality opportunities, low interest rates and an abundance of debt availability will support commercial property investment values during 2005."
The bounce in the office sector seen late in 2004 has continued into 2005, the assessment says, although "deals continue to be frustratingly slow to finalise".
Dublin's office market is, as ever, dependent on growth in the financial services sector and recently employment statistics show an increase of 7 per cent in this market during 2004. This was reflected by significantly increased take-up of office availability and a fall of about 30 per cent in the vacancy rate in the capital.
Values in new homes are increasing at modest levels, with prices set to increase by about 5 per cent during 2005, according to HOK's outlook.
"One real problem emerging in the market is the lack of opportunity in the trade-up market," it indicates. "Virtually no new four and five-bedroom homes are being built in the city so prices for trade-up houses are increasing at a higher rate than for smaller homes. The trade-up gap is widening."
Existing residential continues to see strong demand for homes in Dublin 6, along the Luas line and across south Dublin generally. HOK suggests there is good value available in Dublin 8, Drumcondra and Phibsborough and environs.
"It is also anticipated that the Dundrum Shopping Centre will influence property prices in Dublin 14 and Mount Merrion."
In the area of commercial development lands, demand for retail sites is "leading the way" in this market, according to HOK. "We are witnessing the emergence of a deep market for large commercial development opportunities of €30 million plus."
The depth and scale of demand by developers is covering all retail sectors including local shops, neighbourhood centres, shopping centres and retail parks. Demand has ensured that records continue to be set for well-located retail sites.
