Ireland’s booming economy drives residential demand
Margaret Sweeney, CEO of Irish Residential Properties REIT, attended GRI Residential Europe last November, where the leading players in the asset class engaged in two days of candid discussion and high level networking. During the event, Margaret sat down with the GRI Hub, where she spoke about Ireland’s residential market and the emergence of its alternative class, in the wake of the country’s economic successes.
What are the main challenges that Ireland’s residential sector is facing at the moment?
The biggest challenge in Ireland is supply. In Ireland, over the last few decades, the population has been rising rapidly - we add about 60,000 people every year. This is because our native population’s births exceed our deaths by about 30,000, and the rest is from people coming into the country looking for high value jobs. Historically, our population would emigrate in search of work, but this has changed in the last 20 years. This is resulting in record-breaking amounts of young people looking for accommodation, primarily rented accommodation.
The second dynamic in the country that's causing a supply challenge is our average household size, which has fallen from 5 people per unit to just over 2. So we need to build many more smaller units. Ireland has traditionally relied on a lot of medium sized houses, so our stock of apartments are new and unestablished. We are far behind the rest of Western Europe in this regard, which have large stocks of decades old apartment buildings.
So I think economic growth is very strong. We’re running at over 5% GDP growth, and with good economic policy and a good education system, people are more inclined to stay. This is precisely why a third of Dublin’s population is under 25 - and therefore small-scale housing is needed. To meet supply we need to be building between 35,000 - 50,000 units per annum, and at the moment this number is 22,000 but slowly increasing.
Europe is currently seeing its residential markets evolve into favouring more alternative assets, as urbanisation and millenials drive the need for flexibility. Is a similar thing happening in Ireland as well?I think we’re certainly in the early stages of that evolution. If we take the private rented sector, even apartment living and building new apartments is proving to be quite a big challenge in certain areas even though the demand is there. This is partly down to the fact that 95% of the rented stock in Ireland is owned by landlords who own 5 or less units; the market is very fragmented.
The government is addressing some of our concerns, little by little, through gradual changes in city planning regulations. We’re seeing new strides in coliving as well, but student housing is what is really leading the asset class at the moment in terms of investment appetite and new builds. This is a result of that big commitment to a good education system that I mentioned earlier, as it's helping to attract more international students than ever before.
The other areas that perhaps aren’t being discussed at the moment is how we provide accommodation to parents looking to downsize after their children have grown up. There isn’t really a product for that yet, but it’ll be something to certainly think about in the future. I’d say we’re in the early stages, in Ireland, of seeing a mix of different types of housing, a mix of products on offer, and giving a lot more choice and freedom to people in general.
For more information on the Irish market and how it’s residential sector is set to develop in the coming years, join some of the leading real estate players active in the British Isles at British and Irish GRI, taking place on 3-4 June.
Article by Matt Harris