Sunday 8 December 2019

Result will rattle housing market still reeling from a decade of pain

With rented properties so uncharacteristically expensive here, the Irish accommodation shortage might just as likely prove to be a big. Photo by Christopher Furlong/Getty Images
With rented properties so uncharacteristically expensive here, the Irish accommodation shortage might just as likely prove to be a big. Photo by Christopher Furlong/Getty Images
Mark Keenan

Mark Keenan

As we learned from bitter experience in 2007, the property sector has tended to play down any threat against the domestic market for bricks and mortar.

Back then, even as the tanks of disaster were rolling on to their lawns, a number of firms stubbornly declared the Irish market to be in rude good health. In the case of Brexit, almost all of the big estate agencies are largely unrattled in public - if somewhat unsettled in private. Uncharacteristically, some even made statements to essentially say "we don't know what will happen".

But the Brexit scenario most likely to threaten bricks and mortar here is the prospect of a general economic wallop to the Irish economy overall. If employment is hit across the board from the fallout, so too will demand for property - and values will fall.

While it has also been raised widely, the prospect of increased pressure on the existing Irish stock of homes by a invading army of new workers relocated here is more distant scenario. It would impact only on the big employment centres. Astute economic observers believe affected British-based firms will sit on their hands for 12 months to let the dust settle.

And if they do opt to relocate, they will likely do so in gradual degrees.

More likely is the location of new FDI companies to Ireland instead of to Britain as originally intended, particularly from the USA.

Such an occurrence would undoubtedly put pressure on housing supply here, but not in one great unmanageable surge. With rented properties so uncharacteristically expensive here, the Irish accommodation shortage might just as likely prove to be a big factor in precluding them from choosing Ireland as their next base.

The scenario is somewhat worse for those segments of the market more reliant on British-based buyers. It is estimated that around 3pc of residential property sold in Ireland is acquired by UK-based purchasers - largely by Irish expats looking to come home. So overall, the direct importance of British buyers is small. But where they do have a bigger impact is at the top tier of the trophy home market. They also have an impact in tourist areas, such as West Cork.

Many of these buyers are successful business people who have expensive homes in the UK. If located around greater London, these will be valued near the top of the property cycle. With the Irish market coming off the bottom, until recently conditions were perfect for those selling there and buying here.

Wealthy Irish expats thinking of coming home from the UK will certainly be wondering what to do right now. On one hand, if they leave it too late to relocate and sterling does go into freefall, their purchasing power in Ireland will be neutered severely.

On the other hand, if they have money tied up in stocks and shares, or they are employed in sectors like finance which are deemed "under threat" from Brexit, then they will be reluctant to make any big decisions until the overall outlook is clearer.

There's also the increased risk of a property crash in the south of England where many of these people are located. If that happens, those Irish who wish to return may end up tied to Blighty for many years to come.

Irish Independent

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