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Bad luck for the Irish

Catherine Deshayes

The Irish property investment market is at ‘virtual standstill' according to a leading commercial property and real estate services adviser.

Ahead of the autumn selling season, investment totals for the first half of the year are down significantly from previous years.

This is in stark contrast to this time last year when the results of the first independent Irish property survey revealed continued confidence in property investment.

Since the beginning of the year, the Irish property investment market has been characterised by a lack of transactional activity. Property advisory firm CB Richard Ellis's (CBRE) Irish Capital Markets Market View report for the third quarter of this year found that a mere £312 million of investment deals in Ireland were completed in the first half of the year.

Considering £1.5 billion worth of domestic investment deals took place in Ireland last year, this is a dramatic decline.

Irish investment in UK property plunged to around £300 million in the first six months of 2008 compared with almost £3 billion of investment transactions in the UK in 2007.

CBRE said there was only ‘limited appetite' for properties and potential buyers are having difficulty securing debt-financing and potential sellers were slow to accept the decline in property values.

Managing Director at CBRE Ireland, Guy Hollis said, "Gauging current investor sentiment, it is likely that yields will have to move further if deals are to be agreed between now and the end of the year.

"We believe that yields may have to increase by another 50 to 75 basis points to attract buyers.

"This could bring prime retail yields in the Irish market to between 4.25% and 4.5%; prime office yields to between 5.25% and 5.5% and prime industrial yields to between 6.25% and 6.5%.

"The reality is that there is a weight of money building up for investment in property in Ireland, but not at current pricing. The sooner that yields re-adjust, the sooner liquidity will return," Mr Hollis added.

Ireland's foreign direct investment (FDI) ranking fell four places to 14th out of 30 countries in 2007, according to a survey from National Irish Bank and OCO Consulting.

But the index, which is adjusted to take the size of a country into account, also showed that Ireland was one of the leading developed economies, falling below only Australia. The US ranked 21st and the UK 25th.

According to the Chief Economist at the National Irish Bank, Ronnie O'Toole, Ireland continues to outperform virtually all major developed economies when adjusted for size.

According to chief executive of OCO Consulting Mark O'Connell, "Research and development projects are the cream of inward investment projects globally, and investment projects involving a significant research and development content are highly prized amongst governments and development agencies.

"The strong performance of Ireland in this regard in 2007 is particularly notable given the fact that this is an area where historically Ireland has not performed so well.

Guy Hollis at CBRE went on to say, "Unlike the rest of Europe, 100% of property investment activity in Ireland in recent years has been domestic, with overseas investors put off by the exorbitant 9% rate of stamp duty applying here.

"This issue urgently needs to be addressed by the Government in the forthcoming Budget if private investors and sovereign wealth funds that are active in other markets are to be encouraged to invest in Ireland.

However, it did say that the occupier sectors of the property market in Ireland remain relatively healthy which bodes well for a return to growth in the medium term.

To browse property for sale in Ireland, visit www.themovechannel.com/property/ireland/  

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