Capital flow into property fell 6pc in 2023

Two regional cities also saw their market share increase while Dublin saw its share of capital flows decline to 46pc to reach €11.7bn, reflecting reductions in both residential and commercial spend.

In contrast, Cork and Galway both witnessed an influx of capital into commercial property during the year, while residential spend in these locations also increased. Notably, Cork accounted for the highest portion of capital flows outside of the capital at 10pc, or €2.5bn. Galway absorbed a further 4pc to reach €972m.

Limerick recorded a decrease in capital spend across both residential and commercial property compared with the previous year to reach at total of €615m.

Overall, Irish property totalled €25.5bn in 2023, just 6pc below the €27.2bn recorded in 2022. This is despite the significant rise in borrowing costs throughout much of the year and reflects the resilience of demand in the residential market.

Residential spend, which incorporates residential investment and student accommodation, accounted for the majority of this total at €22.9bn, relatively unchanged from the previous year.

Jean Behan, head of research at Sherry FitzGerald, also points out that although overall flows into residential property remained similar to 2022 levels, further analysis shows noticeable differences in the profile of purchasers.

In particular, non-household entities, including institutional investors, local authorities and Approved Housing Bodies accounted for €4.1bn of total residential spend in 2023, down from just over €5bn recorded in 2022.

This reflects the curtailment of forward-fund and forward-commit type investments during the year. In comparison, spend by private households, including small private investors, increased by 5pc in 2023 to reach €18.8bn.

Commenting on market activity, Brian Carey, commercial director of Sherry FitzGerald said “Across the State, the impact of funding difficulties, rising construction costs and the sustainability requirements for commercial buildings has resulted in significant stranding of assets in the main streets of provincial towns.

"Underutilisation and dereliction issues are a significant problem for many of these commercial buildings. Sherry FitzGerald is involved in a number of bodies currently liaising with government departments to highlight these issues and provide potential solutions that could help improve viability and reactivate these buildings in the commercial SME sector in town centres and cities across the country.”

The outlook for 2024 is positive as the economy returns to more moderate rates of growth, while the recent interest rate cut announced by the ECB will help restore confidence to the market.

Residential spend is expected to remain robust in the year ahead while the recovery in the commercial market is likely to be tentative as the office market, which continues to see strong levels of vacancy, may take longer to recover.

Demand for industrial and logistics and retail space, however, is expected to remain strong while the hotel sector is predicted to see a record year for capital flows.