Capital flow into Irish property rose 12% to €17.7bn in 2016

An analysis of capital flows into the Irish commercial and residential property market reports that €17.7 billion was invested in the sector during 2016 – a 12 per cent increase on 2015, which itself was 6 per cent up on 2014.

The survey, conducted by agent Cushman & Wakefield, suggests the residential sector swallowed two-thirds (or €11.6 billion) of the capital invested – this was up 9 per cent on 2015.

Meanwhile, €6.1 billion flowed into the commercial property market, which represents a 19 per cent uplift on the previous year’s €5.1 billion.

"Dublin continues to be the principal driver of real-estate investment," says Marian Finnegan, chief economist and director of research at the agency.

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“Some €10.9 billion was invested across residential and commercial property in the capital, representing 61 per cent of the total. Notably this was 22 per cent higher than the €8.9 billion worth of capital invested in Dublin in 2015.

“The increase in capital targeting Dublin can be attributable to investment into commercial property, which grew by 33 per cent year on year, to reach €4.7 billion. It is worth noting that this increase is mainly driven by a number of large, big-ticket transactions.”

Capital flows into property outside Dublin remained stable in 2016, following a “significant upswing” in 2015.

Cork accounted for the largest proportion of this but there was a 15 per cent year-on-year decline in the amount invested in the county.

Commuter belt

Commuter belt counties – Meath, Kildare and Wicklow – accounted for a combined 10 per cent of total investment and each experienced a rise in activity during 2016.

The share of investment into residential/multi-family schemes increased year on year to €822 million in 2016 to account for 7 per cent of total capital flows. However, capital invested into the Dublin multi-family sector declined 10 per cent.

“Controversy surrounding the introduction of rent controls, which were at the forefront of discussion for much of the year, are likely to have led to a reduction in demand over the 12 months,” said Ms Finnegan.

Meanwhile, the analysis points to 2016 as a record year for the Irish hotel market, with over €720 million worth of hotels transacting.

“Capital flowing into the Irish hotels market was 91 per cent higher year-on-year,” says Finnegan.

Capital flows into Irish property are underpinned by a healthy economy, strengthening labour market and low interest rates.

Another growing factor is Brexit, according to Finnegan, who says companies considering relocating from the UK “are displaying increased interest in Dublin as an alternative location to London, in order to retain access to the single market”.