Ireland’s historic election result shakes property market

Property developers are bracing themselves for an unprecedented period of uncertainty in the Irish Republic, after Sinn Féin took the largest share of votes in the general election. The left-wing party and former political wing of the IRA secured 24.5% of all votes but fielded only 42 candidates – far below the 80 that any government needs to have a majority in the Irish parliament. The vote in Saturday’s election split three ways, ending the historic dominance of the two traditional parties: the ruling liberal conservatives Fine Gael and centre-right party Fianna Fáil. Sinn Féin took 37 seats in the 160-seat Irish Parliament, compared to Fianna Fáil’s 38 and Fine Gael’s 35. The fragmented results are expected to produce a hung parliament with no party near the required 80 seats. As a result, developers in the country face a challenging time, with no clear policies in place, despite housing having been a defining issue of the campaign. “You will find a period of uncertainty, with the new coalition government being formed, how that is made up and what the final policy positions become,” says Margaret Sweeney, Ires REIT’s chief executive. “Housing was one of the key issues during the election. It is top of mind, whatever the formation of the government and their policy.  There is a period of uncertainty around that, as to what the impact might be for investment and returns. I can see a little bit of a slowing down in the first quarter as a result.” Quintain executive director and joint managing partner of the firm’s Irish subsidiary, Eddie Byrne, adds: “People don’t necessarily mind particular policies, it is all about being able to underwrite with certainty. What really spooks people is when numerous things change. Uncertainty is the biggest issue.” Previously, in 2016, it took 70 days for a government to be formed in Ireland after the parties agreed a confidence-and-supply agreement, which led to a Fine Gael-only cabinet, propped up by Fianna Fáil votes on key policy areas. Shares in Dublin property firms have already taken a hit this week following the news of Sinn Fein’s election surge. Shares in housebuilder Glenveagh Properties had dropped by 10.9% by Monday’s (10 February) 4:30pm close compared to Friday’s (7 February) close, while Cairn Homes lost 8.6% over this period. Ireland’s property REITs also suffered, with shares in residential specialist Ires slumping by 8.6% at Monday’s close and Hibernia REIT sinking by 7%. Call for action Sinn Fein’s historic gains are being seen by many as a protest vote by generation rent. As Michael Flannery, chief executive at Bartra Capital, comments: “Right now, there is a call to arms to help people in an accommodation crisis. People have said very clearly, by voting for Sinn Féin, who are very strong on the housing issue, that they want to see action and they want to see it quickly.” A large part of Sinn Féin’s election success was its appeal to younger voters and pledge to tackle the housing crisis with some step-change policies, Flannery says. He adds: “These are people that are living in rooms at home with their parents, when they should be out in their own accommodation. They can’t get it and they are saying ‘sort it out’.” The party has promised a large-scale public housebuilding programme “over the lifetime of a government”, which would see 100,000 public homes built, comprising 60,000 social homes, 30,000 affordable homes and 10,000 affordable rental homes. By comparison, Fine Gael promised to build more than 25,000 new homes per year from 2020. Sinn Féin has also committed to freezing rents and has pledged to abolish the local property tax, claiming the levy hits low- and middle-income earners harder. Its abolishment could cost the exchequer around €440m (£370m). Additionally, it would undertake a full review of the tax rate paid on distributions by all major REITs in Ireland, arguing “their large-scale predatory buying” has resulted in a loss for the taxpayer. The new state of uncertainty raises multiple questions over the country’s future housing policies, where previously many had expected more of the same. U+I was preparing to pitch for partnerships with the Irish state on housing developments, based on suggestions that the Irish government was poised to unveil a brownfield regeneration strategy. U+I’s first development director for Ireland, Arlene van Bosch, told EG a few days before the General Election: “There is a brownfield regeneration strategy coming out which will provide some opportunities in [Dublin’s] city centre and perhaps some suburban areas. We are keeping an eye out and expect it to be released at the start of the second quarter.” The current Irish government had already taken steps to use state-owned land for new homes. In 2018, it launched the Land Development Agency, with capital of €1.25bn, to build 150,000 new homes over the next 20 years. But the future of a country with a need for 550,000 new homes by 2040, when its population hits 6m, is now far from clear. And based on mathematics, there is a risk a muddled deal could water down policy. As Byrne concludes: “It has been such a seismic result in terms of what the party mix will look like. No one party can form a government on its own, so therefore, no one party’s policies will come in.” To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette