Activity levels in the Irish development land market fell back to a record low in 2023, on the back of rising interest rates and construction costs. However, following an uplift in transactions in the final quarter of 2023, the market is already showing signs of recovery for the year ahead.
According to figures from Sherry FitzGerald, a “very slow start” to the year saw total activity levels slump by more than 50 per cent to just €372 million, the lowest level seen since records began in 2015, across the greater Dublin area, Cork, Galway and Limerick. This compares with a spend of €805 million for 2022. The volume of publicly disclosed transactions was also at a record low, at 86.
Almost 70 per cent of the total spend, or some €256 million, went on land with residential development potential, up from 46 per cent in 2022. Land with commercial or industrial development potential accounted for only 11 per cent of turnover, down from 46 per cent the previous year.
Activity picked up in the latter six months, as, similar to previous years, 61 per cent of turnover was transacted in the second half of the year. Deals during this period included the largest transaction of the year, the sale of 27.4 acres of zoned residential land in Clongriffin, as part of Project Capital North, to the Land Development Agency for €38 million.
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Jean Behan, a senior economist with Sherry FitzGerald Research, puts the low levels of activity down to several factors, such as higher borrowing costs, elevated building and construction costs, and continued delays in the planning system.
Looking to the year ahead, expectations are for a busier year.
“Interest rates are now considered to have peaked, while building and construction cost inflation has receded in recent months, and the planning system is being overhauled, all of which should help restore confidence to the development land market in the year ahead,” adds Behan.
There was an estimated €480 million in land transactions agreed by the end of 2023. These include the significant €152 million agreed by the US Embassy for the acquisition of the former Jury’s Hotel site in Ballsbridge, which is due to close in the coming weeks.
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