Ireland’s Sell to Investors in 2025: Scarcity

The scale of debt accumulated on the US central government's balance sheet is vast - US$ 34 trillion. The federal government has run ever larger annual fiscal deficits in the last two decades to counteract a succession of crises from the global financial crisis to the COVID-19 pandemic. Over this period the size of the US debt pile has quadrupled while the size of the US economy has 'only' doubled. As a ratio of its scale compared with the size of the US economy, this debt mountain has breached 100%. To fund this year's government deficit and refinance redemptions of outstanding debt, the US treasury will need to raise US$ 8 trillion of new debt via bond markets in 2025 alone.

Despite the overwhelming supply, demand for US bonds is deep, given the dollar's unique privilege as the global 'reserve' currency provider. For any business of scale in the world today, holding amounts of US dollars and investing in US bonds is a necessity, not a choice. Similarly, central banks around the world are natural buyers of US government debt as they invest excess reserves of US dollars accumulated from the proceeds of exporting products to US consumers. Even if this demand wavers for whatever reason, the US Federal Reserve will step in to create demand for US bonds. Unlike any other buyer, the Fed does not need first to source US dollars to buy debt; it creates money out of thin air, such is its privilege as the ‘reserve’ currency.

While the US has levers it can pull to ensure its debt pile sustains and its bond market performs stably, it is not a place where a savvy investor will deploy capital for strong returns. Wealth is not compounded in a market where securities are created ad infinitum. Capital craves what is difficult to find - scarcity. The search for supply-restricted investments partly explains the recent strong performance alternative asset classes like gold and bitcoin

In contrast to the prolificacy of US debt issuance, Ireland has dramatically reduced its debt pile in recent years. At its worst in the aftermath of the financial crisis in 2012, Ireland's debt reached a high of over 160% of the economy's size (using Gross National Income). Since then, the combination of years of consistent economic growth and fiscal surpluses has set in motion a virtuous cycle of swift debt consolidation. Over only a decade later, coming into 2025, Ireland's outstanding debt is less than 70% of the size of the economy.

This places Ireland in a cohort of the EU's strongest debtor nations, and in sharp relief to countries where wrestling debt dynamics has not been as easy, with the likes of Spain, France, and Italy hitting debt ratios of 100%, 110%, and 135%, respectively. Ireland's fiscal rectitude is rewarded in real time with low rates of interest required by investors to hold Irish bonds – 3.1% at the time of writing compared with 4.3% for US debt. Such is the strength of the state's balance sheet that very little debt will be issued on its behalf by the NTMA in 2025. Only about Eur8bn of new bonds is likely to be issued this year to feed a market short on Irish risk.

Indeed, considering the overall availability of financial risk exposure in Ireland, investors seeking exposure to our economy's attractive growth profile have limited options. The Irish equity market is small and illiquid. The sell-down of state ownership of bailed-out assets in NAMA is largely complete. The government has ambitious plans to develop the state's infrastructure but has a well-capitalised sovereign wealth fund to finance the rollout.

Commercial real estate may be one of the few areas where investors can capture the scarcity dimension of Irish risk. At CBRE, we estimate that over Eur 3.0bn of commercial real estate investment transactions will close in 2025. Although we anticipate a significant increase from 2024's figure of Eur 2.4bn, investment remains below the long-term average of slightly over EUR 4bn.

Irish commercial real estate has repriced in line with higher interest rates and changes to space utilisation post-COVID. Blanchardstown shopping centre was sold to a US private equity investor in the closing weeks of 2024 – an enormous single-ticket investment in the region of Eur 575m, demonstrating that investors are keen to deploy at scale if given the opportunity.

With a tsunami of risk asset supply hitting certain parts of the world and a dearth of it from Ireland, commercial real estate offers investors a limited but attractive opportunity to gain exposure to Ireland’s successful growth story. Scarce if you can get it.