Luck of the Irish

Once an economic laggard, Ireland has become Europe's boomtown.

Thirty years ago, Ireland was thought of as something of a failure. Despite living standards that had once been as high as most of Europe, the country had fallen behind and had missed out on Europe's post-war boom. As late as the 1970s a quarter of the Irish population worked on the land; the economy was also heavily dependent on exports to the UK. In 1987, even after fifteen years of EC membership, Irish GDP per capita was only 69 percent of the EU average, unemployment stood at 17 percent, and government debt was 112 percent of GDP.

Few countries have ever managed a transformation so complete and so fast. Over the last 20 years the Irish economy has, on average, been the fastest growing in Europe. Social changes have allowed more women to enter the workforce, while the country's relatively low corporate taxes have allowed it to benefit from new waves of foreign investment. Moreover Ireland's low cost manufacturers were wellplaced to benefit from the establishment of the single European market.

As a result, GDP per capita has rocketed up to 136 percent of the EU average, unemployment has dropped to 4 percent and government debt to only a third of GDP. So complete has been the turnaround that in 2004 the Economist described Ireland as “the Celtic Tiger…a rare example of a developed country with a growth record to match East Asia's.”

One result of this has been a real estate phenomenon known as the “Irish buyaspora”. Driven by transaction costs such as the 9 percent stamp duty in the home market, Irish investors plowed more than €2 billion into UK commercial property in 2003 —and another €400 million further afield.

A string of deals—both large and small—have followed. In early 2004, for example, an unnamed Irish investor bought the French headquarters of the Nike group in Paris for €8 million. In December 2003 an Irish property consortium acquired the Lloyd's Building in London in a £240 million deal, while last October the mixed-used specialist Ballymore Properties entered exclusive talks on a potential €2 billion investment in London's iconic Battersea Power Station site. Earlier this year, the buyaspora looked set to continue across the Atlantic when Dublin property company Investor First announced plans to launch Ireland's first USfocused investment property fund.