The answer is that nobody knows and it will take a number of years for the full effects to materialise. However, in the shorter-term, the uncertainty created by the vote is likely to have an impact upon the Irish economy and in turn the Irish property market in terms of a ‘wait and see’ approach.
On the positive side, the office occupational market could experience an increase in demand from international companies requiring a foothold in the EU. As is well known, Ireland ranks very highly in attracting such companies and given that competition from the UK will be reduced, added to the fact that we will be the only English speaking country remaining in the EU, our attractiveness will grow. This will have ramifications for the office market and the challenge will be to have an adequate supply of office space available over the coming years, particularly in Dublin city centre. In spite of this, we don't expect a mass influx of companies and any increase in demand for space will be on a gradual basis.
Linked to this will be improving the supply of housing. FDI companies by their nature employ a large number of foreign staff and this could put even more pressure on the very constrained housing market. Such foreign workers generally like to live in close proximity of their work, so increasing apartment building in the city centre will be important. There could be some key opportunities here for investors in building blocks of apartments but action will be required sooner rather than later.
The construction industry is reaching capacity, particularly in Dublin. A cooling of the construction boom in the UK, which we now expect, may bring some capacity to Ireland and should help ease concerns about construction cost inflation.
In terms of the investment market, funds and private investors from the UK have only made up a small proportion of those buying properties in recent years. Hammerson and Aviva are the most notable. However, Irish investors have always been active in the UK investment market and Brexit may mean that they will consider investing more domestically rather than the UK in the future. Investment is a confidence business. Uncertainty hammers confidence and we expect a considerably quieter second half of the year in 2016 compared to the last two years. Astute investors will find opportunity in that.
On the more negative side, the effect on the Irish economy is at the forefront. Depending on the trade deal reached between the EU/Ireland and the UK, the degree to which Irish exports will be affected will vary. The UK is Ireland’s second largest trading partner with 17% of our exports going to there. Even in the short-term a weakening in Sterling is bad news for Irish exporters due to competitiveness. But in the longer-term, if Irish exports to the UK fall considerably, this could have a major effect on Irish economic growth and jobs. In turn, this impacts on demand for both residential and commercial property. Industrial and distribution occupiers in Ireland are very much linked to and through the UK. Changes here are inevitable with some potential for greater emphasis on air freight and direct access to continental ports.
The really worrying issue is the larger destabilising effect this has on Europe as a unified continent which has been a rock on which our economy is based for over 40 years.
The property market will adapt and Lisney will work to help our clients make the best property decisions. This is something we have been doing long before the EU began.