Property and construction shares are among the worst performers on the Irish Stock Exchange this year, including the country’s biggest private landlord, Ires Reit, which is down almost 37pc.
Housebuilders Glenveagh and Cairn Homes are also two of the biggest fallers in 2022. Glenveagh has given up 31pc in the year to date, while Cairn has dropped 22pc.
The property and construction shares are down despite record high rents, boom-level house prices and well-documented demand for homes.
All three of these companies, which are prominent in metropolitan Dublin’s red-hot housing market, have underperformed the Iseq 20 index of the biggest Irish-listed companies, which has fallen nearly 18pc this year.
This divergence reflects investor worries about price, margin and volume in the sector, with demand potentially weakened due to higher interest rates and deteriorating economic conditions, according to analysts.
Higher input costs from inflation in materials prices and wages has also posed challenges for the sector, which has slowed housing commencements after a strong start to the year.
Other underperforming shares this year are building materials maker Kingspan and pharmacy business Uniphar.
Bank shares have bucked the general market trend, however, and have been moving dramatically in the opposite direction in 2022, especially since the European Central Bank began its hiking cycle in July.
Bank of Ireland stock has rocketed by 68pc with AIB not far behind with a 56pc increase during the year. Even sector laggard Permanent TSB is up more than 13pc.
By contrast, the wider European bank sector is down nearly 6pc in 2022, a better performance than the overall market, but still a loss in value.
Bank of Ireland stock has rocketed by 68pc with AIB not far behind
The domestic Irish banks have benefited not just from a more favourable interest rate environment, which will add more than €1bn in annual income to the sector next year, but also from the pending departures of Ulster Bank and KBC.
All three remaining banks have acquired substantial new income-producing assets from Ulster and KBC while 25pc of market share is now up for grabs.
With non-bank lenders struggling with higher finance costs, the banks have a free run at a growing mortgage market.
Share values globally have taken a battering in 2022 as persistent inflation has prompted the major central banks to aggressively increase rates, setting off a bear market in stocks and bonds alike.
Yet the underperformance of companies exclusively exposed to the Irish property market represents something of a paradox given continued strong gains in house prices and residential rents at all-time highs.
Ires Reit’s steep decline is especially puzzling given its pricing power and extremely tight supply pushing rents up by 14.1pc this year, although cost inflation spurred analysts to trim their forecasts for the stock earlier this year.
However, new apartment building has slowed significantly after an 18-month boom due to high construction costs and rising yields.
