Why Irish Property?
A very good question indeed. The reason there is currently an opportunity in the Irish property market is that Ireland recorded its largest ever financial crash from the end of 2006 to the beginning of 2010. Property values in most areas halved from peak rates and in some very overvalued areas losses were as much as 90%.
It is difficult to portray exactly how cataclysmic the Irish financial crises and subsequent property crash were, but the following graph of government taxes over the period illustrates the point graphically.
The graph is courtesy of the European Commission and is from a very descriptive page on the origins of the boom and the consequences of the following recession – the piece can be found here.
Recovery has been slow, although there are now signs that the economy is tentatively back on the road to sustainability. Unfortunately, as you would expect, rental rates also took a serious dip, but they are recovering from a far lower base.
There are, consequently, currently opportunities in the Irish market for those with the ability to take advantage of them.
The one large warning is that those outside Ireland often, understandably, fixate on the capital, Dublin. This is where recovery began and there is far less value to be had there than in other areas. It is not unusual for returns to drop below 5% on substantial (€10m plus) portfolios in the capital as there is significant competition between Irish and overseas institutions for each investment coming to market.
Our sourcing team has a preference for smaller lots (€1m to €10m) in areas outside Dublin where competition from larger institutions and foreign investors is significantly reduced and returns are, consequently, higher. It is also constantly on the lookout for portfolios with prospects for significant upside using active management to increase cashflow and portfolio values.