Irish Real Estate: long term Bullish as of 09/11/2014

Where can you hide your money in real assets in the next couple years in a global context? Let’s do a quick top-down screening process, starting from The Economist’s house-price indicators.

Source: The Economist

Hong Kong:

The average housing price in Hong Kong has increased by approximately 100% since 2008 and recently the upward trend has been topping. There is very high probability that the property bubble could burst at a level of 79 times the local rents.

Italy and Spain:

The worst two performers have been Spain and Italy. The two countries have been experiencing recessionary and deflationary pressure since the European debt crisis started. The average house price in Spain, has dropped by 31.6% since the first quarter 2008, much worse than Italy’s -15.2% during the same time period. As the two countries continue to fight high unemployment rates and shrinking economic activities after several years, thanks to governments’ resistance on budget austerity, Contrarian Capitalist expect those two countries will remain the worst places to invest in real estate assets in the near term future.

Ireland:

After a real estate bubble burst and a full scale banking crisis three years ago, Ireland’s property market price level is still 42.2% lower than the price level seen since in first quarter 2008. However, since last year, the trend has been reversing and Ireland has become the best performer among the surveyed real estate markets. The most important factor is also the fact that the country has exited the bailout program, which almost always distorts the recovery process. In addition, given the high probability that ECB will start its own version of QE program, asset backed purchases, and recent negative interest rate policy, real estate as an asset class in Ireland is certainly warranted for a more in-depth look. It should be noted that the yield on Ireland’s two-year note has recently fallen as low as -0.004%. Investors in Europe, to be flooded with liquidity, would likely seek for high-yield assets with more upside potential and less downside risk in Ireland.

The following table and chart represent the latest price movements of residential properties in Ireland.

Source: Ireland Central Statistics Office

Source: Ireland Central Statistics Office

The following chart shows a year-over-year change for houses and apartments in Dublin and in the whole nation

Source: Ireland Central Statistics Office

And, the construction activity is picking up.

Dwellings completions, number

Source: Ireland Central Statistics Office

Finally, a quick screen from Bloomberg showed three real estate listing securities on Irish Stock Exchange, including Green REIT PLC, Hibernia REIT PLC and Irish Residentia, which could be researched into further for potential investment opportunities.

Source: Bloomberg

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Update as of December 28, 2014

The price level of residential properties has continued to rise in Ireland through October 2014, from July 2014 when we wrote the original post.

Source: Ireland Central Statistics Office