Factors Affecting Supply and Demand for Apartments in Dublin

• Sarah McCarthy

Introduction

The purpose of this report is to analysis and inform ABC Property on the major factors affecting supply and demand for apartments in Dublin 2 as a long term reasonable capital gain rather than short term speculative profits. I will examine the property prices in recent years in this area along with the rental market. Within this report I will examine the recent property trends in Dublin, the up and coming areas and changes that will occur as time goes on.

I have chosen to report on apartments in Dublin 2 because after much researching I can see huge yields in the rental market in this area along with huge demand as the supply of new apartments in this area are limited because there is very little room to expand.

Main Text

Dublin 2 is the city’s most up and coming area for entertainment, bars, restaurants and sporting events. With the new Bord Gais Theatre, Marker Hotel and plenty of multinational companies coming on board in recent year it has set Dublin 2 as being the new ‘place to be’. Comparisons have been made to San Francisco when that was a growing ‘tech hub’. It is throwing the demand to live here to new levels which have never been seen before. There has been such an influx in recent years of multinational companies setting up their European and/or world headquarters here it has been a key factor in the growth and recovery for Ireland since the recession. Irelands low corporate tax rate of 12.5% has pushed Dublin to the top destination country for foreign investment. This huge flood of jobs has brought thousands of new and returning people to the city.

Dublin 2 has everything you need at your doorstep which adds to the attractiveness of it for investors, purchasers and renters. There are excellent transport facilities, including the DART, Dublin Bus, Luas and the new Dublin bike scheme which is proving to be a hit in the city, there are excellent parks within some of Dublin oldest squares which are full of markets, concerts and sporting events throughout the year. Dublin’s universities are recognised throughout the world which also brings in a vast amount of students to the city. Dublin is ever popular with people investing as we have low interest rates on mortgages, are an English speaking country, in the Euro zone and within the GMT time zone.

Dublin 2 is nearly full to capacity, according to daft.ie on 20^th November 2014 there are no sites for sale for the purpose of building residential properties. The new building regulations brought into effect in March 2014 it is putting a lot of extra expense on builders who have already acquired land but have yet to start new developments. The banks are also very slow to fund developers with new projects. All these examples are showing the extremity of the lack of supply to the area now and in the future. This is excellent news for an investment purchase as the supply cannot increase it brings security to people that the area and property are in demand and prices can only go up as property cannot be increased.

The residential property market has had a very volatile past few years but there has been much stability recently, it is making Dublin a very smart place to invest in. Property prices have been slowing increasing over the past few years. There has been 9 strong quarters in the sales market but still the prices are 48% lower than at the peak of the boom. In a stark contrast looking outside Dublin, the property prices are up just 2.6% since the crisis. Purchasing residential property in a prime area like Dublin 2 at the current prices has very good prospects of achieving superior returns over medium to long term. According to daft.ie on 23^rd November 2014 there are only 40 apartments to buy on the open market with such lack of stock available it is increasing the demand which will drive prices up. Dublin is definitely an investors market as banks are still slow to hand out mortgages giving investors an upper hand. Cash buyers are currently making up 60% of the market.

The rental prices have had a strong year, they are now up 18% since the crisis. This is putting down a strong ground to the future of renting. Rents are still down 20% on it highest rate at the peak which gives great confidence that there is a lot of room to improve and will continue to rise in the next few years. The best yields in the country are with apartments in Dublin city Centre. Currently 3 bed apartments are bringing yields of 8.5% annually. 1 and 2 bed apartments are still attractive with 7.8% and 7.9% respectively.

The amount of people renting in the Dublin has grown by 47% in the past 5 years. This is a huge jump which I think is caused by the following reasons; jobs are increasing in the capital at an alarming rate but are not necessarily employing staff on a permanent basis, there are more contract and temporary staff which is not allowing people to secure mortgages. The foreign nationals who are coming over for employment with the large multinational companies are usually young and only stay for a period of between 4-5 years. As a lot of companies are still on a salary freeze people are holding off applying for mortgages until they get a pay increase. This is turning the market into a landlord’s market in comparison to a few years ago when it was a tenants market. As the landlords have the power they can be pickier with their tenants and are the force behind the increase of the rental prices along with the media attention this specific topic has been getting in recent weeks. According to daft.ie on 23^rd November 2014 there are only 90 apartments to let in Dublin 2. The least expensive apartment on the rental market was €1,200 per month, it was a 1 bed 1 bath located near Merrion Square.

From my personal experience with some the thousands of foreign nationals arriving into the capital who are employed by the likes and Facebook, Google and Amazon they like to live close to their work place and near plenty of bars and restaurants, they are not interested in living in the suburbs and commuting far distances. They are key to the rental market in Dublin city centre as they are usually on big salaries and are willing to pay a lot more.

Dublin rents tell a very different story to the rents in the rest of the country. The average rent of a 1 bed apartment in Dublin is €1,148 while in the rest of the country they rents are only averaging at €594.