Irish property investment sector much improved since 2009 but outlook still subdued

News - Banking

Written by Ray Clancy

Friday, 01 October 2010 10:28

As Ireland braces itself for more financial shocks, the real estate sector has been given a boost with investment in the Irish property sector increasing 95% compared with 2009.

The Irish Investment Report from real estate consultants Savills says that total investment in Irish property in the first three quarters of 2010 is expected to total €243 million compared to €140 million in the same period last year.

International buyers are attracted by the potential high returns available at all price levels, according to Fergus O’Farrell, investment director at Savills.

‘Investment activity so far in 2010 has been considerably stronger than 2009 with increased appetite from private, domestic investors dominating demand for smaller lot sizes. The profile of investors interested in the Irish market includes institutional investors, property companies, opportunity funds and private investors from the UK, Germany, the US and the Middle East,’ he explained.

Savills also said that the focus of investment in the third quarter of this year was on the retail industry, with seven out of the 12 deals recorded being for retail property. The first industrial deal in Ireland also took place in the quarter with two confidential transactions totalling €12 million.

According to Joan Henry, head of research, activity is now being constrained by a lack of prime products. The report shows that supply is at its lowest levels since 2005 although it is expected to increase over the coming months as vendors start to position themselves for potential disposals.

There is evidence of prime retail yields hardening following several transactions on Grafton Street but the lack of transitional activity has slowed down the pace of recovery as seen in other major European cities this year, the report adds.

However, the increase in supply will not be very significant in the short term and it will remain difficult to source quality properties producing secure income streams, it also says.

‘Market activity, while up on 2009 levels, will remain subdued. In relation to non prime assets, supply is expected to increase and demand looks set to remain poor for this category of asset. There is potential for prime yields to harden if the highest quality properties become available,’ the report concludes.