Brexit outcome will affect Irish property sector

ANDY JALIL –
andyjalil@aol.com –

Of the 27 remaining countries in the European Union after the UK’s departure, the one which is most likely to be affected by Brexit is Ireland with its close links with Britain in practically every aspect of daily life. Ireland made remarkable recovery after the global financial crisis a decade ago, having been hit the hardest economically, among the EU members.
However, the one area where it has been unable to make progress is housing where prices have dropped and there has been a severe shortage in rental property and social housing.
Now, according to a nationwide survey of estate agents, house prices should rise by 4.2 per cent this year, but only if there is a soft Brexit. Prices in the capital city area, Dublin, are expected to be slightly lower at between 2.8 per cent and 4 per cent. But estate agents warn that if the UK crashes out of the EU without a deal, that will take Ireland “into the unknown”.
Depending on the severity of the hit to the Irish economy this year, property price growth could be lower, prices could be static for a time, or prices may even fall in many areas. The prediction of a 4.2 per cent rise comes off the back of a 4.64 per cent rise nationally in the price of an average semi-detached house last year. In Dublin, the rise was lower at 1.97 per cent.
However, house prices grew by less than one per cent across the country in the final quarter of 2018, with uncertainty over Brexit cited as one of the main reasons for the slowdown. Real Estate Alliance (REA) house price forecast for this year says there are a number of challenges facing the market in 2019, including a possible hard Brexit and affordability threshold being reached in parts of the country.
Agents in the capital city are predicting price rises of 2.8 per cent in 2019, with increases of 4 per cent forecast for north county Dublin (4.9 per cent in 2017). Meanwhile, in south county Dublin there is an anticipated upturn of 3.5 per cent (0.9 per cent in 2018).
However, Brexit uncertainty is affecting different locations for different local reasons. These include: (a) Uncertainty in Border (with UK’s Northern Ireland) counties where locals stand to lose most from the loss of free movement and commerce;
(b) In the upper end of the Dublin market where many high net worth individuals who buy property are relying on business exchanges with the UK. Conversely, this is also the end of the market which will benefit from the influx of banking immigrants;
(c) In farming areas where there are fears that the local economy will take a big hit;
(d) Holiday home locations where UK buyers, retirees and tourists are a big factor in the market. Conversely, there is also evidence of UK nationals considering a move from traditional UK expat locations in Spain and other European sunspots; (e) In areas which have previously experienced high emigration. Irish buyers returning from the UK make up a big part of the market and these will now sit tight to see whether their buying power will be affected.
REA spokesman, Barry McDonald said: “Typically, it remains the case overall that lower value stock is selling better than larger family homes above €400,000. We expect a minimal increase in values as stock levels on the market continue to rise. In my own area in Lucan, new home developments are earmarked to hit the market in spring (this year), and this will only continue the trend of increased stock numbers.”
McDonald added: “It is hard to predict what will happen with Brexit and property prices. Our agents either see people holding back in Border and holiday home areas because sterling might rise giving buyers more power, or more generally, because they do not know how the market will react to a no-deal scenario.”
Other agents in the capital predict a Brexit slow start this year. In south of the city agent Ed Dempsey said the Brexit effect was now starting to show at the upper end of the market, and this year’s prices would reflect the final Brexit outcome. However, estate agencies in three of the four main cities outside Dublin are cautiously optimistic about the current year, with rises of 4 per cent predicted in Cork (2.4 per cent in 2018) and 5 per cent in Galway, which experienced 9.7 per cent growth back in 2017. In Limerick city, REA O’Connor Murphy is predicting an increase of 4 per cent with a stronger new homes market.
(The author is our foreign correspondent based in the UK. He can be reached on andyjalil@aol.com)