Irish property values fell a further 1.5 per cent in the final quarter of 2012, bringing total declines for the year to 6.4 per cent.
However, Ireland’s total return for 2012, 3.1 per cent, was 60 basis points higher than the UK’s (as measured by the IPD UK Monthly Property Index), buoyed by a double digit income return of 10.1 per cent, one of the highest measured around the world by IPD.
Last year was the first year of positive returns for the Irish market since 2007, according to the SCSI/IPD Ireland Quarterly Property Index.
The raft of measures introduced by the Irish government last year to bring some relief to the struggling market did not have an immediate effect on Irish property performance. Eurozone contagion fears and slow economic growth, continued to negatively impact on investor sentiment and occupier demand, but they have gradually helped to restore confidence in some prime areas of the market.
Stamp duty reductions, a moratorium on capital gains tax and a final decision on retrospective rent reviews all brought much needed stability, and as a result capital declines, particularly in the office sector, slowed throughout 2012 – compared to an 11.4 percent decline at the headline level in 2011.
A number of ‘big name’ international tenants have moved to Ireland over the last two years, attracted by improved Irish competiveness, maintenance of low corporation tax, a well-educated young workforce and heavily discounted rents – 48 percent below their 2008 peak.
Improving tenant demand has attracted the attention of investors interested in heavily discounted assets. 2012 saw some of the first big sales, in the office market, to international investors willing to move up the risk curve.
Phil Tily, IPD managing director for UK and Ireland, said: “Initial yields in Ireland are now in excess of 9.5 percent, and as returns around Europe have slowed in a very difficult year, for those willing to consider counter cyclical investment plays, Ireland offers the opportunity to edge up the risk curve.
“Furthermore, GDP for the year is expected to be positive, and though under one percent, it is nevertheless the second consecutive year of growth (after 1.4 percent in 2011), and this may further boost the confidence of investors, valuers, and occupiers.
“While Ireland is certainly not yet out of the woods, for the first time in five years there have been some encouraging signs around the market.”
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