Up to €1bn could be spent on development land purchases
AS much as €1bn may be spent on purchases of development land this year, but prices appear to be stabilising, say two estate agents.
John Donegan, director at Cushman & Wakefield, says that following a robust opening half to 2019 and strong sales pipeline for the remainder of the year, the development land market should expect to record turnover in excess of €1bn this year.
He estimates that about €490m has been transacted in four key markets, the Greater Dublin Area (GDA), Cork, Limerick and Galway, in the first six months of the year. That was a 16pc increase on the comparable period in 2018.
However, CBRE's Marie Hunt says there has been increasing evidence of price stabilisation in the development land sector over recent months as developers react to easing house price inflation, affordability issues and rising build cost inflation.
She says that after a somewhat quieter transactional period during the summer months, several site sales are now nearing completion which will boost spend and create new price evidence in due course.
"There is particularly strong demand for sites guiding up to €5m and a busy H2 is clearly in prospect as new sites are formally launched for sale. However, with most of the land coming to the market and transacting at present comprising relatively small infill sites, the overall spend on development land is likely to be down year on year, albeit consistent with spend in the 2014-2017 period," she added.
One large transaction that will dominate headlines in this sector over the coming months is the 80pc interest in the Irish Glass Bottle site in Dublin 4, for which Nama is seeking €125m.
One of the most recent site sales was a former 0.84-acre motor showroom residential site on Goatstown Road in Dublin 14 which has been sold through agent Knight Frank for more than the €6.6m.
Architects O'Mahony Pike had designed a feasibility study which showed it had potential for a development with a three- to five-storey scheme of 75 apartments over a basement car park. The site has 90m of frontage on to Goatstown Road and for decades had been occupied by various car showrooms, the latest of which was Charles Hurst which has vacated the property.
An even bigger sale was seen with Lone Star's purchase of 118 acres at Cherrywood in South Dublin for more than €120m from investment firms Hines and King Street Capital.
In two plots, the property has the potential to deliver 2,600 houses and apartments. That suggests at least €46,000 per unit site.
Meanwhile the developer Marlet has been offloading sites. It sold two sites to investment managers Tristan Capital Partners for a combined €54.5m. These have permission to deliver 663 new homes, suggesting an average of €82,200 per unit site.
One of these is a 9.63-acre site in Cabra, Dublin 7, which has planning permission for 420 new homes and the second is a 7.2-acre site at Aiken's Village, Sandyford, Dublin 18, which has permission for 243 new units.
Near Dundrum Town Centre in South Dublin, Irish house builder Lioncor Developments is reported to have bought an eight-acre site at Gort Muire, Ballinteer, for €35m from the Carmelite order.
Even though the Gort Muire land does not have planning permission, a feasibility study indicated it has potential for more than 400 apartments along with retail space. That suggests a price of around €87,000 per apartment unit.
In north Dublin, two plots divided by the relief road at the Raheny roundabout, Lusk, were bought by an Irish house builder for around €4.8m. Knight Frank had been guiding €3.8m for the combined 8.6 acres which are zoned residential but don't have planning permission.
In Dublin 4, a 1.26-acre site at Castle Park, Sandymount, was bought by another Irish house builder for around €7m through Knight Frank. It had been guided at €9.5m at one stage.
While it has planning for 25 units including houses, that was granted before the recent update on planning heights.
Research by Cushman & Wakefield shows that residential sites dominated development land deals in the first half of the year, with about €371m worth of this type of land transacting, a 9pc increase year on year accounting for 76pc of the total value of land that transacted in the market.
However, it shows an overall slowdown in the volume of transactions, falling from 112 transactions in the first half of 2018 to 54 transactions in the first six months of 2019.
The large drop in volumes of activity was predominantly felt in sales of sites priced below €5m where deals fell from 92 in H1 2018 to 33 transactions in H1 2019.
Nevertheless, Mr Donegan expects that residential will remain the stronger sector of the market, particularly for sites suitable for build-to-rent apartments.
In contrast, he says the shortage of prime sites for large scale commercial projects is stifling the number of commercial development sites transacting, despite prevailing demand.
While the value of commercial site deals rose in the first half of the year from €22m in H1 2018 to €61m in H1 2019, the supply of commercial sites is falling short of market demand.