With Covid-19 still presenting daily challenges to the economy, with the rollout of vaccination programmes around the world we can begin to see the end in sight. We are far enough along now also to have a real sense of the damage caused over the last 12 months to various sectors in the property industry in Ireland.
The housing sector remains strong in Ireland, mainly due to a massive shortage of stock which is in turn causing prices to rise as much as 5% over the last year. With mortgage approvals up 12% on last January the outlook is good. The housing shortage in Ireland will take many years to recover from and the residential market should see continued gains until at least the supply can meet the demand. Some estimates put that date at more than ten years away.
Thankfully, the commercial real estate sector is proving to be surprisingly resilient. A marginal decline comes off the back of 6 consecutive years of a strong performance, being down by just 0.5% in December 2020 according to the Society of Chartered Surveyors Ireland (SCSI). Call for optimism for sure. It’s no secret however that the retail and hospitality sector have been hit the hardest with constant closures and uncertainty, SCSI shows a 15% decline in returns for retail at the end of 2020 and the hospitality and tourism sector suffering an approximate decline of 85% in 2020 according to ITIC CEO. With a return to non-essential shopping and tourism on the horizon, a swift recovery in yields may be on the cards.
The industrial and logistics sector continues to show promising results for investors with an overall annual return of 8.7%. It seems the positive results for the industrial sector is stemming from the changes in trading with Britain. The changes in trading due to Brexit has led businesses to review their supply chains and consider establishing or increasing existing in-country storage and distribution.
While it was thought that office spaces would no longer be part of the business future due to the change in work-from-home model, it is becoming clearer that the office will still hold a strong presence in the world of business into the future. Like the commercial sector, Brexit has brought promise to the Irish office sector as companies are now setting up physical spaces. While office spaces may change their dynamic to accommodate mixed working opportunities, the office will still be a place of work in the future.
The last 12 months have been turbulent to say the least, but perhaps not as bad financially as many had feared. Yields have certainly been affected in some sectors but remained strong and in some cases actually gained over the course of the pandemic. If ever more pertinent, the need to diversify one’s portfolio should be apparent to all.
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