Institutional investment in Irish property down 80%, Central Bank says
Institutional investment in residential real estate in Ireland fell by 80 per cent in 2023 and 2024, according to the
Central Bank
.
'Inward capital flows and equity financing for new residential development have fallen markedly,' the bank's director of financial stability Mark Cassidy said at the launch of the regulator's latest Financial Stability Review.
Changes to the global financial system from higher interest rates and increased uncertainty were of particular concern to the residential rental sector here, he said.
Mr Cassidy noted that inward investment in residential real estate in Ireland averaged €450 million a year in 2023 and 2024 compared to an average of €2.5 billion in 2021 and 2022.
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'The availability of this type of equity financing is particularly important for meeting supply targets for residential property over the medium term,' Mr Cassidy said.
Changes announced this week to the State's system of rent controls were primarily designed to attract foreign capital.
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The Government's new plan will permit landlords to reset rents at market rates when tenancies end instead of being tied into 2 per cent increases under the former Rent Pressure Zone (RPZ) rules.
Asked for his view on the changes, Central Bank governor
Gabriel Makhlouf
said the regulator had not had the time yet to adequately assess the changes.
'But we do know – from international experience – rent controls have an impact on housing supply,' he said.
In its review, the Central Bank warned rising geopolitical tensions, shifts in global trade policy, and higher economic uncertainty have increased risks to the Irish financial system.
'As a small open economy, with a high reliance on foreign direct investment from the United States, Ireland is particularly exposed to recent trade tensions and external macro-financial developments,' Mr Makhlouf said.
'In the short run, the main channel through which these developments are likely to affect the domestic economy is uncertainty as well as a reduction in external demand,' he said.
Mr Makhlouf noted there had already been some softening in consumer sentiment while 'industry engagement points to cautiousness among companies, at least for now, in terms of new investments'.
Any reduction in activity by US-owned multinationals, particularly 'in economically concentrated and trade sensitive sectors' such as pharmaceuticals and ICT, could affect employment, tax revenue and investment here, the governor said.
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