Dublin ranked last in survey of property investment performance
Published 02/02/2010 | 05:00
DUBLIN has been ranked last for the second year in a row in a major survey of investment performance of existing property assets. The study was compiled by Pricewaterhouse Coopers (PwC) and the UK's Urban Land Institute.
It examined 27 leading European cities and found that while there had been a "slight improvement" in sentiment for investment in the Dublin market, it remained in 27th place for the performance of existing assets, which has sharply deteriorated over the course of the past two years.
"Prospects for new acquisitions are slightly better," said the report, which is based on the results of surveys of bankers, investors, developers and brokers around Europe.
"Some overseas investors are positive about the opportunities," it added in relation to Dublin.
The report quoted one investor who said: "Ireland has strengths that people are not seeing and so they end up focusing on its major downsides."
The report also notes that in terms of development prospects, Ireland has managed to move out of its last place rating, which was taken by Madrid. Ireland remained just ahead of the Spanish capital.
Central London is the most attractive European location for new property investment after prices fell the most in 20 years, according to the report.
Office-property returns have slumped in Ireland, from close to an annualised 30pc per annum in early 2006 to more than minus 30pc in 2008.
Office-vacancy rates were almost 22pc in Dublin at the end of the third quarter last year, compared to 11.1pc a year earlier. In central London, the corresponding figures were just 7.2pc and 3pc.
The PwC report also highlighted concerns that there was about €1,000bn of commercial real-estate loans sitting on eurozone and UK banks' balance sheets. That doesn't include a further €95bn in European commercial mortgage-backed securities (CMBS). At least €200bn of this will mature in the next four years.
"Helped by large dollops of government aid, banks have been postponing judgment day," said the report.
About €77bn in loans granted by Irish banks to build or acquire numerous projects around Ireland, the UK and the US will now be hived off to the National Asset Management Agency.
"The banking system is too fragile for the banks to mark-to-market on real estate," said one respondent to the PWC survey.
Some Irish investors are still actively acquiring investment property elsewhere in Europe.
West Incorporated, headed by Irishman Brian Conneely, has just inked a deal to acquire the landmark Telephone Palace building in Sofia, Bulgaria, for about €22m.
That is nearly half the price that the building was rumoured to be worth in mid-2008.