Housing shortage to drive land prices up 15pc in 2017
Residential development land is expected to be the star performer of the commercial property sector in 2017, with prices set to rise by up to 15pc in Dublin and by 11pc elsewhere, according to the Society of Chartered Surveyors Ireland (SCSI).
The forecast is contained in the SCSI's Annual Commercial Property Review and Outlook Report for 2017, which is due for publication today.
The predicted increase in the price of residential land is informed by the responses of 380 SCSI members to a national survey carried out by the society and by in-depth interviews with senior industry figures on the outlook for the market.
With the combination of the Government's recent introduction of the 'Help to Buy' scheme and the easing by the Central Bank of its mortgage deposit requirements expected to spur demand from first-time buyers, builders are expected to commit in greater numbers, and on a greater scale, to the commencement of new housing developments. This anticipated upsurge in activity is expected to drive residential land values at all levels of the market.
Average prices for residential development land in Dublin are already being propelled at the higher end of the market by aggressive bidding and speculation in relation to prime infill and brownfield sites in the capital's most sought after locations.
In Dublin 4, two sites are leading the charge in this regard. In the case of the former St Mary's Carmelite seminary on Bloomfield Avenue in Donnybrook, an Irish hotelier is understood to be fending off competing offers from several developers including Ballymore Properties, Cairn Homes and Rohan Holdings with a bid in excess of €16m. At some €6m above the guide price, that €16m figure equates to a price per acre of €5.17m for the 3.09 acre site. The outcome of the bidding war could see either a 200-bedroom hotel or up to 120 high-end homes being developed on the former seminary's lands.
Elsewhere in Dublin 4, the disposal by State broadcaster RTE of up to half of its 31-acre Montrose campus could easily secure in excess of €70m (over €4.6m an acre) and see the potential delivery of up to 500 new homes on the site. While agents Savills have yet to offer the lands to the market formally, a number of the country's biggest developers are, unsurprisingly, believed to be gearing up to bid for the site.
Outside of the market for residential development land, the SCSI believes the value of land for new offices will continue to grow strongly in Dublin in 2017, with an increase of 12pc following the 17pc figure recorded in 2016. Beyond the capital, the increase is expected to be far more restrained at just 3pc, reflecting the fact that post-Brexit demand remains confined, for now at least, to Dublin.
The industrial sector, which proved to be the best performer of all sectors in 2016, is forecast to grow strongly this year, with prime rents in Dublin predicted to rise by between 8pc and 9pc.
In the retail sector, prime retail zone A rents in Dublin are being forecast to grow by 7pc, compared to the 12pc recorded in 2016. Rental growth for shopping centres in in the rest of Leinster are forecast to grow by 8pc this year, while prime city rents in the Connacht/Ulster region are expected to increase by 5pc. A more modest increase in rent is being predicted by the SCSI for Munster.
Commenting on the SCSI's views in relation to the retail sector, the society's president, Claire Solon, said: "In Dublin, a shortage of retail units and unsuitably sized floorplates are two primary challenges, along with rising rents. In the rest of the country, two problems identified were over-supply and excessive rates, the latter being raised as an issue particularly in Munster. Another area highlighted is cross-border retail leakage, which is an increasing concern to the retail sector in the border counties."