IRELAND - Activity in the Irish residential market will stagnate in 2008 as economic growth drives up office, retail and industrial, suggests a market report published by CB Richard Ellis.
Even given an upturn in investor sentiment, a fall of up to 30% in house completions and a substantial inventory of unsold housing stock will slow growth in the residential sector, according to the real estate experts.
Decade-long residential undersupply ended with the construction of 93,ooo units in 2006. "We needed to turn the tap off," CBRE research director Marie Hunt told IPE Real Estate. "Despite job losses and increased uncertainty last year, it's still a strong market. Buyers haven't gone away."
Hunt suggested the overall forecast masked a number of discrete trends.
"Because housing was down in 2007, there was an assumption that the same was true of the property market as a whole - but the trends were not connected," she said.
The 12-month forecast cited a well-controlled balance between supply and demand in commercial occupier markets, "with the potential for further, albeit slower, rental growth".
However, its author warns of a slight risk of oversupply in the retail sector as consumer spending slows in 2008. "There has been a huge upsurge in retail development. There's the potential for oversupply there - but no indication that it's inevitable," said Hunt.
CBRE is "very confident" about the market's prospects in the second half of 2008, with a pick-up in sentiment and the availability of finance and the emergence of "opportunities to achieve real value".
In the meantime, Irish investors will continue to invest in prime property in Europe and "varied destinations" globally. With a return to fair value in the UK market in H2, demand from Irish investors for London sites will likely increase.
"The big issue for developers is that those looking for bank funding will find it restricted. We'll have to wait until the Q1 reporting season is over and the situation becomes clearer.
"Irish investors think there might be more value to be had in the UK, which will reach the floor at the end of Q1," she added. " Things will be clearer at the end of the quarter and by the summer they'll have improved."