The Republic of Ireland's property story of late is a tale of two markets: there's Dublin on the one hand and, on the other, the rest.
According to latest data from the Central Statistics Office, Dublin's residential property prices grew by 3.3 per cent in July, gaining 8 per cent year-on-year. This contrasts with house prices in the rest of Ireland (excluding Dublin), which lost another 0.1 per cent in July. Dublin apartments have done even better, appreciating in value by 11.6 per cent in< 12 months.
It's not all joy for owners: even with the recent growth, Dublin house prices remain
52 per cent lower than their early 2007 peak, while apartments are down by 59 per cent.
But at least landlords have reason to smile. Rents in Dublin are up by 7.5 per cent, after registering their fourth consecutive quarter of growth. "This is the fastest rate of rent inflation since mid-2007, six years ago, and reflects tight supply in the Dublin market," states a draft report by Ronan Lyons, in-house economist at Irish property site Daft.
Those who began the year with strong projections for the capital city are not surprised. Professional services firm
PwC highlighted "improved prospects for Dublin" in its emerging trends in real estate report for 2013.
"[Our data] indicates improvement in Dublin real estate prospects across the board as prices are seen to be bottoming out," said Enda Faughnan, PwC Ireland real estate partner, at the report's launch. "We are certainly seeing increased interest from international investors and, together with renewed activity from local high-net-worth individuals, this will result in a stronger transaction flow this year."
Guy Hollis, managing director, CB Richard Ellis (CBRE), agrees: "It is not surprising that Dublin has moved up the ranks in this year's study, buoyed by a notable increase in the volume of investment transaction activity over the last 12 months as banks, receivers and the NAMA [National Asset Management Agency] continue to release assets to the market for sale. We believe that prime property in the Irish market is now moving into a recovery phase. However, secondary assets will take considerably longer to unwind."
So far, so good, CBRE says. Marie Hunt, the firm's executive director for Ireland, reports a "notable improvement in transactional activity in the first half of 2013, both in terms of the commercial property market and in the residential market in Dublin specifically".
In her latest commercial property report, Hunt "continues to see prime real estate improving in value as yields in almost all sectors of the market contract in response to the weight of capital chasing investment opportunities and expectations of future rental and capital appreciation".
On residential values, Hunt notes there "is a clear divergence between pricing and transaction volumes in Dublin compared to the rest of the country", with undersupply of some property types, particularly family homes, driving some price rises.
Property adviser Mark FitzGerald, the chief executive of Sherry FitzGerald Group, Ireland, also says that there is "clear evidence of an emerging stability" in the market this year. To date, it has been "incredibly busy", he says.
"The total volume of investment for the first half of 2013 stood at approximately €610 million (HK$6.4 billion).
"This compares favourably to a total of €624 million transacted for 2012 as a whole," FitzGerald says. "Notably, activity remains concentrated on the capital and in particular Dublin city centre, when prime office rents have stabilised and have begun to increase.
"The residential market has stabilised and there is notable strong price growth of 6.1 per cent in Dublin in the first half of the year."
Sherry FitzGerald uses a different data collection methodology to the Central Statistics Office - its figures show that house prices are on the rise across the country, with Dublin leading (up by 6.1 per cent, compared with 3.6 per cent for the rest).
FitzGerald says: "The stronger performance in the Dublin market reflects stronger local economic conditions and a particularly tight supply of available properties. As of July 2013, only 0.9 per cent of the total private housing stock was available for sale in Dublin. This equates to about a six-month supply based on current demand. In contrast, the comparable figure for the country overall was 2.5 per cent, which is only about 18 months' supply. So in effect, the Dublin market appears to be leading the Irish market to recovery."
Investors make up 13 per cent of the firm's Dublin sales to date this year, with foreign investors accounting for "a large proportion". Most come from North America and Britain, while investors from Malaysia, Singapore and Australia are "also notably active".
"There is definite increased interest from [mainland] China and Hong Kong with traffic to our website up 39 per cent on the same period last year, and 31 per cent for Hong Kong," FitzGerald says. "Low entry costs to purchasing here and the general acknowledgement globally that Ireland is handling its troubles well and is now poised to exit the euro bailout successfully in 2014 are further reasons why Irish property is in demand."
But has Ireland got the supply side right? Hunt notes that more than one-third of the Irish population lives within Greater Dublin, although even at the peak of the market, only 20 per cent of house-building nationwide occurred in Dublin. "We now find ourselves with considerable oversupply in locations with low populations, and low demand but undersupply in key cities such as Dublin. This is fuelling the price rises we are now seeing, with very limited new development taking place."