The Irish Opportunity

Despite dark predictions around the 2023 global economy, we see opportunity in the Irish residential market”

The new normal

Macroeconomic forces are creating huge uncertainty in markets. Inflation has increased the cost of labor and materials. Central bank intervention, required to address inflation, has increased the cost of capital. The investor outlook has become guarded and liquidity is drying up from markets. Companies are preparing for a recession, and implementing significant cost-cutting measures. Welcome to today’s economic reality

However, In spite of this economic uncertainty, Irish residential property remains an attractive investment strategy for Single Step Ventures. We expect this opportunity to hold up over the long term, because of strong market fundamentals, a lack of housing, and the availability of derelict buildings.

Strong market fundamentals

The overall market dynamics and supporting framework creates opportunity and investor confidence;

1) Ireland has a growing population in excess of 5 million people

2) Continues to have excellent employment demographics and strong tenant profile

3) High levels of foreign direct investment

4) Favourable supply/demand dynamics and availability of opportunities

5) Robust legal system

6) Robust performance of residential asset class

7) Improving the infrastructure system

A lack of supply

Since the Great Financial Crash (GFC) in 2008, there has been a lack of housing developed. Since 2016, only 120,000 new homes have been built in the state. During that same period, the population increased by 360,000. Experts predict that 40,000 new homes need to be built annually, over the next 8 years (until 2030), to address this severe shortage.

Derelict buildings

Ireland has one of the highest rates of vacant buildings in the developed world. Around 9% of the total housing stock is estimated to be in a derelict state. Social and political awareness of this issue has increased. State and local governments are now taking proactive measures to try and get the existing stock back into use.

To conclude

A complex system like the economy cannot be perfectly modeled. There are existing and new forces that can change the behavior of the economy at any time. Currently, we see Irish residential property as a solid investment area based on a robust set of indicators., but we will always be reassessing that position. To manage risk further, each deal we do is evaluated against strict investment criteria and risk management guardrails. Each deal must be a “standalone” viable venture if we are to commit to it.

Rob Heffernan