Property’s rise closely linked to EU
“People in Ireland are less likely to live in an apartment than anywhere else in the EU — just 12% versus the EU average of 42%. Some 88% of Irish people live in houses compared to an EU average of 57%.
EU FACT “IDA had a good year in 1995; by 1996, Lisney reported property had re-established itself as a truly desirable investment
European Union membership, and 60 years of onward progression from the signing of the Treaty of Rome, has had an enormous, if not seismic, impact on Ireland’s built environment, on its construction and employment sectors, on the investment and property markets, and all on related professions, from finance through banking, legal services, surveying, transacting, building standards and practices.
It has been a catalyst for development and change across an almost unimaginable spectrum — everything, in fact, from the most macro level of billions of euros of structural funding, down to the literal brass tacks of things likes screws, fittings, and sealants, all regulated by the Construction Products Regulation, and the familiar ‘CE’ marking of harmonised European products.
Even a cursory consideration of such phrases as “money and jobs follow roads” and ”there’s money in muck” have struck chords in Ireland — the latter expression ringing true throughout the agriculture sectors, whilst infrastructure investment has transformed not only how we work, but also where we work and who pays us to do it, as well as how we sell our products.
Back in the late 1950s, when the Treaty of Rome triggered a chain of modernising change in motion, the nature of Ireland’s construction and property markets was simple, slow- moving and quite an historically encumbered, under- financed beast. But, looking back over quite a unique archive of annual property market reports almost coincidentally dating to 1958, and benchmarking performances against key European integration dates, Lisney’s director and researcher Aoife Brennan says that in considering how the property market has evolved, we must look at it in the context of the wider economy.
“Ireland’s seismic change in economic policy following the release of T.K. Whitaker’s paper ‘Economic Development’ in 1958 ( a year after the establishment of the EEC), along with our membership of the EEC in 1973, and the creation of the European Single Market in 1993 were critical turning points for property and in performance in the years that followed,” Ms Brennan states.
“In the early 1950s, Ireland’s economy was performing poorly with prevailing growth rates of about 1% per annum and with economic infrastructure generally underdeveloped. The end of protectionism and the promise of greater levels of productive investment in 1958 meant that the property market now had a chance to grow. ( This article has further examples from the Lisney Annual Report, below).
Meanwhile, “there’s no doubt that infrastructural improvements that have come about as a result of Ireland’s involvement in the EU have been hugely significant, making our towns and cities more connected and accessible and facilitating much of the foreign direct investment that subsequently materialised and which is now such a vital engine of activity in the Irish economy, asserts Marie Hunt, who’s Head of Research and an executive director with international property advisory giant, CBRE.
“In particular,” Ms Hunt states, “improvements in road infrastructure and the development of the motorway network have played a critical role in stimulating and supporting economic activity and property development in Ireland over recent decades”.
Picking up and expanding on the ability of roads investment to stimulate knock- on projects, Savills director Roland O’Connell instances how such investment “began to allow the economy to grow swiftly. An example of this would be the M50, which was EU-funded, and the completion of it led to the development of office centres like Sandyford and Park West but also to the major shopping centres like Liffey Valley and Blanchardstown.” ( Ironically, the Irish Examiner had initially contacted him by phone while he was on a EUfunded motorway driving from Dublin to Galway).
“Allied to this was centralised policy in relation to things such as air travel, which tried to dampen unfair state aid. The reluctant increase in competition resulted in reduced cost of travel from which we have benefitted greatly, be it for business or leisure purposes, he points out.
Savills’ Roland O’Connell also makes the point that “similar regulation in relation to State aid has probably helped us, in that we would not have had the resources to compete for investment against some of our larger and wealthier fellow EU members.”
According to Mr O’Connell “one of the definite benefits of our membership has been the growth in inward investment and the jobs that that were created. It not only created jobs in direct employment, but also in the construction sector and other professionals such as accountants and solicitors.”
Mr O’Connell says that a demonstration of this effect is to look at construction in the Dublin office market, over pre- and post- EEC membership decades.
Office supply output in the decades following accession “was double what it had been in the 10 years preceding it. While the market did stall through the depressing 80’ s, the 10 year period between 1993-2002 saw output at over 4.5 times our pre-accession level. This demonstrated the benefit not only of our membership, but also that the investment in infrastructure was beginning to allow the economy to grow swiftly.”
Looking back over an impressive 59 years of their annual Irish property reports, Lisney’s researcher Aoife Brennan notes that in the late 1950s, house prices were falling (prices they recorded that year spanned a huge gulf, from £1,000 to £22,175,) and it wasn’t until the 1960 year-end review that there was talk of a ‘levelling off’ of house prices and an appreciation of “how very little impetus was required to bring about a better balance”.
The 1960s saw a new pace of development, starting in 1960 as “a critical year for the modern office sector,” with the first purpose-built modern office constructed on Dawson Street in Dublin.
Land use zoning came into play in the mid-1960s (as did industrial development, and land speculation!), and new development also saw “the erection of new hotels, luxury style flats and fac- tories”. “Increased loan facilities” were available and there was “increased investment from abroad”, which confirmed a wider acceptance of the “country’s more stable economy”, Lisney’ end-year reports marvelled.
A slowdown in the early 1970s saw the next key watershed as entry into the common market in 1973, the development of investment links with other European countries. Ms Brennan unearths the opening line of Lisney’s annual report for 1973 stating “the year just ending has confirmed the general trend of rising property values, which indeed must in the future be furthered by Ireland’s entry into the EEC”. It adds: “The most marked effect of Ireland’s entry into the EEC has been the significant increase in the value of agricultural land with prices of well over £ 1,000 per acre being obtained”.
High interest rates and inflation characterised the early 1990s, and while the report noted that 1993 “was the year in which time seemed to stand still,” after that year’s creation of the European Single Market and unrestricted access to a very large market “was a key driving force behind the huge inflows of FDI into Ireland in the late 1990s, as US firms sought access to the European market.”
Lisney reports that 1995 was the IDA’s best year in attracting overseas industry, notably electronics, and Cork’s Apple Computers announced a major expansion to a workforce of 2,000strong, that year’s review happily concluded.
By 1996, the Lisney report chronicled “property had well and truly re- established itself as a desirable investment, with or without tax relief benefits”.
This was the start of very strong levels of new building completions and takeup in the commercial sector, and the Lisney annual report summaries of that period noted expressions such as “buyers often shocked by the level of competition” and “premium figures being achieved”.
Taking that long view, “this was the beginnings of the Celtic Tiger era and the rest, as they say, is history,” observes Ms Brennan, rather ruefully.
Numerous sprawling property developments like Dublin’s Liffey Valley complex came in the train of infrastructural investments such as the EU-funded M50.