Ireland’s Emerging Property Needs

Marian FinneganChief Economist

Sherry FitzGerald Group

PII Seminar, June 28, 2012

Ireland’s Emerging Property Needs……….

Residential Market

Demand and Supply

Price Performance

Commercial Market

Occupier trends – Regional Office Market

Irish Retail Market

Concluding comments

Demand and Supply

Demand: Ireland’s Population

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

5000000

1901 1926 1946 1956 1966 1979 1986 1996 2006

Population: 4.58 million in 2011, 8.2% growth on 2006

Demographic Profile

0-14 Years: 979,590 21%

15-24 Years: 580,250 13%

25-49 Years: 1,755,325 38%

50-64 Years: 737,694 16%

65 Years plus: 535,393 12%

Total 4,588,252 100%

Demographic Profile - Dependency Levels

Ireland Germany

0-14 Years: 21% 13%

15-24 Years: 13%

25-49 Years: 38%

50-64 Years: 16%

65 Years plus: 12% 21%

How we live today 2011:

Permanent Private Households 1,649,408

Own with Mortgage or Loan 583,148

Own Outright 566,776

Renting from Private Land Lord 305,377

Renting from Local Authority 129,033

Voluntary/Co-op 14,942

Live rent free 25,436

Not Stated 24,696

How we live in 2011 compared to 2006:

Permanent Private Households 1,649,408 (1,462,296)

Own with Mortgage or Loan 583,148 (593,513)

Own Outright 566,776 (498,432)

Renting from Private Land Lord 305,377 (145,317)

Renting from Local Authority 129,033 (105,509)

Voluntary/Co-op 14,942 (50,480)

Live rent free 25,436 (21,701)

Not Stated 24,696 (47,344)

Current Demand - An analysis of Purchasers

An analysis of Completed Sales in H1 2012• Owner Occupation 81%• Investment 11%• Additional Residence 6%• Development/other 2%

• First Time Buyers 29%

An analysis of Sales Agreed in Dublin in H1 2012

• 40% of purchasers bought with 100% CASH

Future Demand, Demographic Projections

Year Population

2011 4.58 million

2016 4.78 million

2021 4.96 million

2026 5.10 million

Source: Sherry FitzGerald Research

Future Demand, Demographic Projections

Year Housing Demand

2012-16 26,000

2016-21 34,000

2021-26 31,000

Average PA 30,200

Source: Sherry FitzGerald Research

Supply Analysis

Housing Completions 1970-2011

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011

LT average: 34,441 units

Second Hand Supply as a % of Total Private Housing Stock

New Supply as a % of Total Private Housing Stock

Total Supply as a % of Private Housing Stock

Stock for Sale compared to vacancy levels

Census 2012 1.64 million Occupied Households 11,000 Properties Occupied by Visitors 45,000 Residents Temporarily Absent 168,000 Vacant Houses 62,000 Vacant Apartments 59,000 Holiday Homes

230,000 Vacant Dwelling – excluding holiday homes

Stock for Sale compared to vacancy levels

What might they be: 27,000: 50% of houses for sale are vacant 18,600 complete and vacant new homes 36,000 Private buy to let properties vacant 14,000 Local Authority Properties vacant

95,000 Explained Vacancy

135,000 Unexplained Vacant Dwelling

Price Performance

Dublin Second-hand Market

0

100

200

300

400

500

600

700

800

Sherry FitzGerald Barometer of House Prices

-66.7%

Dublin Second-hand Market

0

100

200

300

400

500

600

700

800

Sherry FitzGerald Barometer of House Prices

Dublin Second-hand Market

0

100

200

300

400

500

600

700

800

Sherry FitzGerald Barometer of House Prices

Ireland Second-hand Market

0

50

100

150

200

250

Sherry FitzGerald Barometer of House Prices

-63.1%

Ireland Second-hand Market

0

50

100

150

200

250

Sherry FitzGerald Barometer of House Prices

Ireland Second-hand Market

0

50

100

150

200

250

Sherry FitzGerald Barometer of House Prices

CSO v Sherry FitzGerald – Dublin Index

Dublin Residential Index - CSO & Sherry FitzGerald

0

20

40

60

80

100

120

140

160

2005

M03

2005

M06

2005

M09

2005

M12

2006

M03

2006

M06

2006

M09

2006

M12

2007

M03

2007

M06

2007

M09

2007

M12

2008

M03

2008

M06

2008

M09

2008

M12

2009

M03

2009

M06

2009

M09

2009

M12

2010

M03

2010

M06

2010

M09

2010

M12

2011

M03

2011

M06

2011

M09

2011

M12

2012

M03

2012

M06

CSO Index Sherry FitzGerald Index

What does all this mean for residential property?

• It’s the Economy…………….

• Established Market - Property Prices will fall during 2012 on

macro basis - peak to trough in order of : 65%+

• Notable latent demand in Economy, confidence and lending

remain a challenge

• 26 County Market – each location will perform differently in

years ahead, Dublin likely to outperform all other locations

• First to recover: Family homes – Potential for price inflation

• Medium term: 2012-2021: Requirement for 30,000 PA

Commercial Markets

Occupier Trends

-100000

-50000

0

50000

100000

150000

200000

250000

300000

350000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

0%

5%

10%

15%

20%

25%

Take Up Net Take Up Vacancy Rate

Sq M. %

Dublin Office Market 1990 – 2011

Dublin Q2 2012Central Business District Q2 2012

Market Stock 3.35 million sq m 1.71 million sq m

Take Up (2011: 128,000 sq m)H1: 56,200 sq m

(2011: 66,700 sq m)H1:37,900 sq m

Availability 748,700 sq m 266,600 sq m

Vacancy Rate 22.3% 15.5%

Under Construction

0 sq m 0 sq m

Pre-let 0% 0%

Dublin Office Market, Q2 2012*

* Preliminary data

Grade Sq M % %

A1 107,500 40

A2 28,800 11

A3 36,800 14

Sub Total

173,100 65

B1 14,600 5

B2 78,900 30

Sub Total

93,500 35

Total 266,600 100.0 100.0Source – DTZ Sherry FitzGerald Research

Total Office Availability in CBD by Grade Q2 2012*

* Preliminary data

Analysis of A1 Supply*

A1 Size No. of OfficesSum of

Availability%

<1,000 Sq. M. 12 7,450 7%

> 1,000 < 5,000 Sq. M.

12 26,350 25%

> 5,000 < 10,000 Sq. M.

2 10,600 10%

>10,000 Sq. M. 5 63,150 58%

Total 33 107,550 100%

* Preliminary data

Regional Commercial Office Markets, Q2 2012

Galway Cork Limerick

Market Stock 293,000 sq m 510,650 sq m 305,300 sq m

Take Up – YtD 3,400 sq m 4,700 sq m 5,350sq m

Availability 38,400 sq m 128,550 sq m 74,700 sq m

Vacancy Rate 13.1% 22.6% 22.3%

Under Construction

0 sq m Redev: 6,050 sq m

26,700 sq m 0 sq m

Pre-let 0% 17% 0%

Ireland - GLA Density by County - 2012

Distribution of Shopping Centres in Ireland

Concluding Comments

Emerging signs of stability in niche markets

Stability emerging in Dublin housing market, and eastern

corridor

Other regional centres to follow, Cork and Galway

Constrained supply of Grade A offices in Dublin CBD

Secondary and suburban markets remain under pressure into

medium term

Galway market stabilising, Cork to follow

Need for regeneration of existing shopping centre space,

potential for a second European standard shopping centre.