09 Jan 2019
Irish REITs and Housebuilders: Crane count at a new high
The latest Irish Times monthly ‘crane count’ for Dublin, conducted in conjunction with Savills, showed that a record 109 behemoths loomed on the capital’s skyline on New Year’s Day.
This compares to just 34 when the newspaper first sent an intern equipped with a pair of binoculars up to the roof of its city centre building in February 2016.
This represents an increase of five on December’s count. Of the machines, 41 (+2) are located on the north side of Dublin’s River Liffey, with 68 (+3) on the south side.
One of the interesting trends in recent times is that the cranes are increasingly moving out towards the suburbs as city centre schemes (which became viable earlier in the cycle) complete.
IRES REIT: Large apartment scheme for Tallaght
Today’s Irish Times also reports that private developer Marlet is seeking permission for a large scheme in Tallaght (South-West Dublin) involving the delivery of 1,500 apartments, 403 student bedsit places and “a number” of commercial units. Marlet assembled the 17.8 acre site for what looks like a bargain €16m price in 2016.
Phase one of the development, which entails the student bedspaces and 438 apartments arranged in blocks of four to ten storeys in height, has been put before the State planning authority under the ‘fast track’ scheme for developments of more than 100 residential units. In a sign of the times, the living areas will be complemented with communal lounges, a gym, meeting rooms and a dedicated concierge.
At the end of November some 564 (22%) of IRES’ 2,608 owned properties at that time were located in Tallaght, across the Priorsgate, Laurels and Tallaght Cross West developments. Occupancy across these was extraordinarily high, with only one unit available to rent at the end of the month. To this end, we are unsurprised that Marlet views Tallaght as an attractive area for investment.
Irish Economy: Flat unemployment and retail sales data
Two CSO data releases, covering November’s retail sales and December’s unemployment figures, provide an update on the health of the Irish consumer.
To start with the unemployment data, the seasonally adjusted monthly unemployment rate was steady at a 10-and-a-half year low of 5.3% in December. The headline rate finished 2018 some 90 bps below where it signed off 2017 at. The seasonally adjusted number of persons unemployed fell by 600 in the month to 127,100, which is 20,000 lower than the end-2017 figure. Previously released CSO data show that the economy is adding 1,300 jobs a week, with total employment +3.0% y/y in Q318. Given such a strong rate of job creation, we expect to see further reductions in the unemployment rate from here, absent of any macroeconomic shocks (near-term developments at Westminster could prove pivotal in that regard).
Turning to retail sales, the headline performance in November was somewhat lacklustre, with volumes -0.1% m/m while the cash value of transactions was flat in the month. Core (ex-auto) sales were flat in value terms with volumes +0.2% m/m. On an annual basis, headline volumes were +3.6% (core +1.9%), with the value of those sales +2.7% (core +0.4% y/y). In terms of sectoral performance, there is a ‘Black Friday effect’ in the data, with Electrical Goods volumes +6.8% m/m (and +24.0% y/y!). Overall, nine of the 13 segments of the retail trades show annual volume growth in November, with 10 segments posting an annual increase in the value of their sales.
A combination of mild weather and brisk employment and wage growth, should see a strong December trading performance when the next set of retail sales data are published next month. One area of concern, however, is consumer sentiment, where the headline ESRI-KBC index has slumped from the 16 year high of 110.4 last January to the latest (November) reading of 96.5, largely driven by fears about the external environment.
Irish Economy: NTMA lines up syndicated transaction
Ireland’s NTMA yesterday announced that it had mandated joint lead managers for a forthcoming syndicated sale of a new 10 year bond, maturing 15 May 2029.
The NTMA released its 2019 Funding Statement in mid-December, guiding bond issuance of €14-18bn this year. This follows €18bn of issuance in 2018.
We had previously opined that the agency was likely to launch a syndicated transaction in January (as seems to be a tradition for the NTMA!) and that it was also likely to involve the sale of a new 10 year bond given that the Sovereign had (up to now) no scheduled maturities falling due in that year. As such, this news is not a surprise to us.
May begins Brexit debate on back foot
Last night the UK Prime Minister lost a vote in the House of Commons on an amendment to the Finance Bill, marking Theresa May as the first PM in 41 years to lose a vote on the Finance Bill. The amendment was passed by 303 votes to 296, with 20 Tory MPs (including Sir Oliver Letwin, usually a May loyalist) backing the clause. Whilst this isn’t actually a piece of Brexit legislation, it is related with the amendment making it more difficult for the government to collect taxes unless no deal is specifically sanctioned by Parliament. Indeed last night’s vote would support our view that there is a majority in favour of avoiding a no deal scenario. Note that today will see the restart of five days of parliamentary debate ahead of the proposed meaningful vote which is currently scheduled for next Tuesday (15 January), with reports this morning suggesting a time of 7pm for that vote to take place.
Overall reaction from the pound has been minimal, although EURGBP has retreated below 0.90p this morning. The mounting opposition to a no deal Brexit should be seen as positive development, however with 5 days of debate ahead of next week’s vote Brexit uncertainty remains the key theme for the time being.
Another brick in the wall
US President, Donald Trump, gave a national address yesterday evening to warn of a “growing humanitarian and security crisis” at the Southern border whilst also trying to lay the blame for the (partial) government shutdown, which is now 18 days in, at the hands of the Democrats. The President did not however declare a national emergency as a way to fund his border wall, though clearly yesterday’s address laid the groundwork for this possibility. In an effort to get more bits of Federal business operational, Democratic House Speaker Nancy Pelosi, plans to bring forward a number of individual funding bills (Treasury Department and IRS) to the House this week; the President’s sign off remains a hurdle to some of these, though he has promised that American’s tax rebates will go ahead, in recent days. The path forward from here includes negotiations resuming at the White House today, where the eight congressional leaders are expected to gather. On Thursday, Trump plans to fly to Texas to personally visit the southern border and highlight the “crisis”. Meanwhile, federal agencies continue to grapple with the effects of the shutdown and a number of US economic data releases continue to be effected. Tonight’s Fed minutes are still set for release at 7:00pm this evening.
US/Chinese trade talks
China’s foreign ministry confirmed earlier this morning that the recent round of negotiations have concluded, the results of which should be released soon. Markets aren’t expecting anything ground breaking from this set of negotiations with the more important round of talks to commence later this month. US President, Donald Trump did however say that “talks with China are going very well”. In a similarly upbeat tone, Bloomberg have also reported that ‘according to sources’, Mr. Trump, in an aim to stabilise volatile financial markets, is ready to do a deal with China sooner rather than later.
Today’s economic calendar
UK Parliament begins debate on Brexit deal
15.00 CA Bank of Canada meeting
19.00 US FOMC meeting minutes (Dec)