CBRE: Challenging times ahead for Irish residential sector

Property consultants CB Richard Ellis said on Tuesday that it expects 2008 to be a challenging year for some property sectors in Ireland. In its Outlook report for the Irish property market, the property consultant is relatively upbeat about prospects for the commercial property sector, but added that activity in the residential sector in Ireland will remain relatively stagnant this year and particularly in the first half of 2008. CBRE believes that house completions could realistically fall by another 30% during the next 12 months.

The property advisor remains very confident about prospects in the commercial occupier markets including the office, retail and industrial sectors on the basis that the Irish economy continues to perform relatively well in European terms and the balance between supply and demand in these sectors is well controlled. However, CBRE warns developers to be mindful of the potential for oversupply in the retail sector, considering the quantum of new retail accommodation delivered in Ireland in the last decade and the fact that consumer spending is expected to slow down in 2008.

CB Richard Ellis expects a noticeable increase in transactional activity in the hotel and pub property market during 2008, but says in view of the current economic and financial backdrop it is unlikely that developers will pay unrealistic prices for premises with alternative development values as was the trend in recent years.

Domestic investment activity is expected to remain strong this year. However, the uncertainty in global financial markets will continue to have a major impact on sentiment in the first half, with the bulk of investment activity likely to be concluded in the second half. The international real estate advisor also sees yielding coming under pressure in some sectors of the Irish market.

CB Richard Ellis believes that 2008 will see a major re-adjustment in the development land market in Ireland. A decline in the availability of bank funding and stagnation in the Irish housing sector over the last 12 months led to significant price declines in this sector. This will lead to strong demand for well-located sites from opportunistic developers looking to acquire land at 'fair value' this year. With prospects for the Irish property market weakening, CB Richard Ellis expects demand from Irish developers for good sites in the UK, most notably in London, to increase in 2008.