Development Land Market Outlook 2024
The outlook for 2024 is positive. Building materials and interest rates have likely peaked and declines are expected over the course of the year. Download our full Outlook 2024 report.
The development land market has been challenged for several years; greatly impacted by uncertainty in planning policy and endless delays in getting a finalised planning permission. In the last two years construction cost inflation (labour and materials) and elevated finance costs (if available at all) have also greatly impacted the viability of new schemes and hence demand for land. Activity in the market was subdued last year across the country, albeit boosted toward the end of 2023 by the LDA’s €44m acquisition of land in Clongriffin. In the Greater Dublin Area, it is estimated that market turnover was about half the level of the preceding two years and about two-thirds less than the 10-year average.
Encouragingly however, the outlook for 2024 is more positive. Building materials and interest rates have likely peaked and declines are expected over the course of the year. In addition, the new Planning & Development legislation is earmarked to be enacted mid-year, and it is hoped it will speed up the process. These factors, along with the fact that land values have been adjusting since 2019, means that the development land market is in a better position going into 2024, albeit with obstacles remaining and new ones emerging. The Residential Zoned Land tax was postponed for one year in Budget 2024 but this will remain an uncertainty in the market until maps are finalised. So too will the proposed Land Value Sharing mechanism, among other policies.
Purchasers and finance
State-funded bodies will dominate
The public sector through the Land Development Agency, local authorities and approved housing bodies will be the key purchasers of land and forward commitments of schemes in 2024. Significant government funding is available, however individual bodies’ capacity constraints may hold back activity.
In the private sector, as with last year, many primary and secondary funders will remain largely absent from the market in the opening months of 2024, reluctant to lend on land until interest rates begin to come down and there is more certainty on the direction of the economy generally. There may however be some construction lending for those with debt-free viable sites. That said, there remains an acute shortage of ‘beds and sheds’, which will drive demand. Cash purchasers will be in a very good position, but they will only consider deals when they see value.
Emanating from various sources
Supply this year will come from various sources, including those who have postponed sales in recent years, from institutions, and from those who are not now in a position to develop out schemes. Some supply will come from developers and investors that acquired sites using secondary money in recent years and need to refinance. Given the cost and availability of finance from both traditional and alternative lenders, refinancing will be difficult, and some will be forced to sell.
The Land Development Agency will generate much of its land supply from State and Semi-State bodies but will also engage with private sellers. Private developers will be utilising the various schemes on offer to develop out affordable purchase and rental, including Croí Cónaithe (Cities) and STAR (Secure Tenancy Affordable Rental Investment Scheme).
Planning and Development Bill, 2023
Judicial review reform is essential
A comprehensive new planning act replacing the 2000 legislation was due in 2023. However, following stakeholder engagement and some redrafts of the original Heads of Bill, the finalised Bill was not published until late November. It will now be mid-2024 at the earliest before it reaches the final stages of the Oireachtas and signed into law. There is likely to be further amendments before that. A new legislation aims to bring clarity, certainty, and consistency to how planning decisions are made.
Key reforms are set out below along with comments on potential benefits and/or issues. For all measures, the final legislation and then how policy works in practice in the years ahead will need to be monitored. If there are operational issues, then any adjustments must happen quickly – Ireland must have a planning system fit-for-purpose to address the housing crisis and position the country in the right direction in terms of infrastructure going forward.
Download our full Outlook 2024 report.