It is critical that further Government intervention in the multifamily accommodation sector is now curtailed to avoid large amounts of investor capital opting to move into other sectors.
That's according to commercial property firm, CBRE, which claims investors in residential apartment and other multi-unit housing developments are used to regulation in every market in which they operate and understand the need for Government to monitor investment activity.
But it says such investors are now frustrated by the number of interventions by the Irish Government in the market in recent years.
"Regulation will unfortunately continue to be a restraining factor in 2022, especially with the potential for rental growth now constrained in the Irish market," CBRE said in its Market Outlook 2022 report.
The analysis predicts that high tenant demand and the favourable outlook for the sector will outweigh these considerations, particularly for longer term institutional capital which is primarily concerned with longevity and certainty of income.
But it states that restrictions proposed by the Central Bank on the level of leverage within Irish-domiciled regulated funds has the potential to impact negatively on the pool of capital targeting multifamily accommodation unit investments in the Irish market.
"This is disappointing considering the extent to which this capital can assist with the Government’s ambitious aspiration to develop 34,000 housing units of various types and tenures every year for the next decade," CBRE says.
"It is also regrettable that a decision has been made to phase out long-term social leasing as this mechanism has a clear role in supporting delivery of social housing."
The report also points to some proposals in the new draft development plans for Dublin City Council and Dún Laoghaire Rathdown County Council, which it claims will also pose challenges from a development and viability perspective.
Dún Laoghaire-Rathdown County Council has proposed in the latest draft of its new development plan that developers would have to ensure three-bed units make up at least 40% of new apartment blocks and that apartments would require further storage and space for parking.
CBRE states that despite despite regulatory and policy changes and the impact of the pandemic, the multifamily sector showed remarkable resilience last year.
"Strong tenant demand supported both stable occupancy and high rent collection rates throughout the pandemic, boosting investor confidence in this niche sector," the report says.
But it also points out that availability remains severely constrained and the undersupply situation is unlikely to alleviate in the short-term, despite Government plans to address the shortfall.
It says it expects to see stronger investment interest in secondary cities over the course of the next year, even though the viability of such regional city projects will remain compromised.
Regarding offices, the report says many businesses remain unsure about what size and form of offices they are going to need into the future.
But it says occupiers are beginning to look at growth and expansion opportunities again.
It predicts that office take up will continue to improve through this year, but it is likely to be next year before leasing in that market returns to pre-pandemic levels.
The property company also claims that because of the length of time it takes to deliver new office buildings, it is important that developments that already have planning permission move to begin construction in order to ensure supply remains consistent in the years ahead.
The report finds that €5.5 billion was invested in Irish real estate last year.
Of this, 41% went into residential, 30% to offices, 18% into industrial and logistics and 6% was invested in retail.
CBRE expects that as well as more traditional investments, investors will look this year for alternative places in the real estate market into which to put their cash, including data centres, film studios, self-storage, life sciences, senior housing, and alternative energy.
There will also be an increased focus on sustainability, it thinks.
"Although the legacy of the pandemic will remain with us for some time yet, the strength of investor, developer and occupational demand is encouraging," said Marie Hunt, Executive Director and Head of Research at CBRE.
"Even sectors that have been severely impacted by Covid-19 should see transaction volumes revert back to 2019 levels over the course of the next 12 months - in essence going 'back to the future'."
She added that while supply bottlenecks, price increases, inflationary pressures and the pandemic are key risks in the short to medium term, strong occupier and investment demand and stable short-term interest rates will support confidence and unlock opportunity in the year ahead.
"The issues of viability and affordability will however remain a central theme throughout 2022," Ms Hunt said.