Prominent players on the Irish property market weigh in. The most over-used word in the English language over recent weeks has been Brexit. It is simply impossible at this juncture to assess what is going to happen. There are too many factors outside our control. From a property perspective, the job at hand is to limit the damage to the sector and identify how we as a nation can benefit. What are the views of prominent players in the industry here?
John McCartney Chief economist, Savills
“Brexit will lead to slower growth in the economy here. This suggests weaker jobs and earnings growth which, all else remaining equal, should lead to slower house price inflation than would otherwise have been the case. Weaker sterling – which was immediately evident following the Brexit announcement – may also impact negatively as this makes it more expensive for UK buyers to purchase in Ireland. This may particularly affect Irish people seeking to return home after spells living and working in Britain.
However, there are also potential positives. Interest rates in the Euro area are now likely to remain low for longer than previously expected. This will make buying homes more affordable for owner occupiers who have sufficient savings to access mortgage credit. In addition, the prospect of prolonged low interest rates should continue to attract investors into bricks and mortar because of lower expected returns on alternative assets like deposits and bonds.
“Overall, however, the biggest impact may come from added uncertainty. Buying a home is one of the biggest financial commitments that most families ever enter into, and the imponderables associated with any unprecedented event simply introduce a further layer of uncertainty.”
James Meagher Director, Knight Frank
While it is uncertain how Dublin residential property will be impacted by the Brexit result, we believe domestic market dynamics relating to lack of supply will remain the dominant market concern. The primary way Brexit could have a negative impact on the domestic market would be by adversely affecting consumer confidence.
“This could lead to prospective homebuyers potentially choosing to postpone purchasing for fear that Brexit could be the catalyst for substantial residential market falls in a similar manner to the global financial crisis. The difference being that the market leading up to the global financial crisis had become overvalued, overleveraged and oversupplied – problems not present in today’s market. Indeed, prices in Dublin remain a third below what they were 10 years ago. While Brexit may impact headline GDP growth, we will remain an economy in robust expansion which will continue to spur demand for housing. As widely reported, Brexit may even have a positive impact as firms transfer over roles from London that require a European base to Dublin. To the degree that that this would include high-value financial services jobs, it would lead to a considerable boost in demand for higher-end residential product.”
Claire Solon President, Society of Chartered Surveyors Ireland
It’s currently very difficult to see any positives in this for our sector. For example, one third or €4.5bn of our agri-food exports go to the UK, so it’s clear the result of the referendum and the weakening of sterling will have a negative impact on that trade, and a knock-on effect on land prices. In fact, a report we published last month with Teagasc found the referendum campaign itself had already had a dampening effect on land prices.
“While we’ve been discussing the possibility of a Brexit with our colleagues in the Royal Institution of Chartered Surveyors for some months, it is still very difficult to measure the effect it will have on the construction and property sectors here. The reality is this may only crystallise when the terms of the UK’s exit from the EU emerge. Whether or not it will continue to be a member of the single market is of critical importance, particularly for the free movement of labour. While more companies may choose to set up here – and that’s still a big if – the uncertainty caused by the vote may well contribute to a slowdown in investment by UK pension and investment funds here. We need to embark on a major house-building programme here, and could do without a backdrop of instability on the financial markets. One positive, perhaps one of very few, is that building materials imported from the UK may well be cheaper while sterling exchange rates remain depressed.”
Keith Lowe, Chief executive of DNG
The initial effect of Brexit in the UK has been severe with the value of many public companies, including those in the property sector, being adversely effected. As yet, we have not noticed any marked effect on the property market in Ireland, though many Irish shares have suffered.
“It has been widely reported that some financial firms based in the UK may wish to have sub-offices or completely relocate from the UK to a new EU base with the former being the more likely scenario. Ireland is well positioned to benefit from any such move due to our favourable tax regime, skilled workforce, English dialect and popularity as a European base for many international companies already. No doubt, Brexit and the uncertainty it has provoked will have some negative consequences too, especially in rural areas that are largely dependent on agriculture and in exports to the UK. But overall, I believe the outlook for property here remains good.”
Michael Grehan, Managing director, Sherry FitzGerald
“All our houses are on the British website Rightmove.co.uk and notably during the pre-Brexit weekend of 16-19 June, the number of ‘hits’ for our houses was 8,556. Last weekend, post-Brexit, our hits went up 147pc to 21,276; this in a week when exchange rate movements made our houses more expensive to British purchasers. Perhaps this is an indicator of a future shift in population.”
Pat Davitt, Chief executive officer, IPAV
“Brexit has created massive uncertainty and insecurity, I believe on the agricultural side prices are a small bit depressed this year already, and while a lot of English buyers are not in the local small holding sales, these sales will not be affected. On country homes and residential farms, English buyers are going to be worse off as sterling has weakened so to bid as much, it will cost more; some will be able to afford it, some will not, so these types of sales are that little bit more vulnerable. The optimistic side is that there appears to be more Irish/British people thinking of returning home.”
Peter Stafford Director, Property Industry Ireland
“For generations, Irish house building and property firms have had a substantial presence in the UK. Their activity in the British house-building sector has survived many economic crises so I would be confident that when the new economic and political environment reveals itself, there will still be a large cohort of Irish property and construction businesses working in Britain. Brexit, however, does fundamentally change the importance of Ireland as the only native English-speaking country in the EU. We need to make sure that businesses which decide to maximise their presence in the EU market by locating in Ireland have access to the offices, houses and infrastructure they need to do their work. A speeding up of investment into Ireland will put further pressure on city centre commercial and residential space which is already under massive demand pressure.”