Valuers remain cautious, but there are signs of life in the Irish occupier market
Irish property values fell again the first quarter of 2012, by -1.8%, after the temporary reprieve granted in Q4 2011 by the lowering of stamp duty.
However, the rate of decline slowed to its lowest since March 2010, and total return, at 0.6%, was positive for the second quarter in succession, according to the SCSI/IPD Ireland Quarterly Property Index.
“Valuer sentiment remained guarded surrounding the Irish market, with yield expansion still pushing down values. But, on a cautiously optimistic note, there are tentative indications of improving conditions in the occupier market, as rental declines slowed to -0.8%, their lowest in since 2008,” explained Phil Tily, IPD Managing Director for the UK and Ireland.
“Rents have fallen by 47% in the last three years, which has made the Irish occupier market extremely competitive, and in the last few months a selection of multinational tenants, in both the office and retail sectors, have taken space or shown interest in the Irish market. After such falls, the sectors offer excellent value for occupiers.”
In the retail sector, units on Grafton Street delivered the highest total return, of 1.3%, and shopping centers delivered an equally encouraging return, of 1.2%.
In the office sector, Central Dublin recorded a return of 0.8%, as capital declines slowed to –1.7%. Rental values in the sector fell by only -0.5%, their lowest since December 2008, possibly a result of increasing interest from international tenants moving to, or considering moving to, Dublin.
Tily continued, “Transactional activity remained muted, but this appears to be a result careful due diligence on the part of investors. The Government’s reforms announced during the budget are taking effect, but slowly, and there are more transactions expected as the year progresses, particularly as investors take advantage of the moratorium on capital gains tax before the end of 2013.
“But while there are signs of life, and whilst the Irish market is expected to be one of the few Eurozone economies to set to see positive GDP growth in 2012, we should not ignore the fact that the Irish property market is still in decline.”
Roland O’Connell, incoming President of the Society of Chartered Surveyors Ireland commented, “It is encouraging to see an improvement in conditions and in demand from both occupiers and buyers in the prime market in Dublin, which demonstrates that we are becoming increasingly competitive in terms of attracting international investment. This is a positive for the economy as a whole in terms of delivering returns to the exchequer and employment.
“However, demand for secondary product is still challenged and it may take some time before we see an improvement in this sector of the market.”
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