The current environment of rising interest rates has forced a reassessment of the value of Irish property, causing international buyers to pause their buying activity.
A new report from real estate advisor BNP Paribas Real Estate shows that €625 million in corporate real estate investments were made in the first quarter of this year, a decrease of 18% compared to the same period last year.
International investors have displaced domestic buyers of income-producing properties over the past decade, with the local share of sales falling from 55% in 2014 to less than 14% last year.
However, the report shows a sharp decline this year. US investors deployed $14.75 million in capital in the first quarter, down from a 10-year quarterly average of $213 million.
Between 2013 and 2022, US investors bought €8.7 billion worth of offices, shops, warehouses, apartments and other rental income.
Germans have been the second largest foreign buyers, with more than €6 billion in the last ten years. However, there were no German purchases in the first quarter, the first time since 2017 that this has happened.
John McCartney, research director of BNP Paribas Real Estate, said:
As rates rise, fixed income investments become relatively more attractive and there is less leverage for real estate transactions. This reduces the amount investors are willing to pay for a given stream of rental income.
It means slowing rental growth and rising interest rates, which are now adjusting the value of investment properties. However, Ireland’s demographic profile remains an attractive place for property investment.
“International investors continue to have confidence in Ireland as an investment location, particularly as our demographic profile supports strong demand for residential, logistics and certain forms of convenience real estate, including supermarkets and retail parks,” said McCartney.