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Property outperforms shares, bonds

Investors in Irish commercial property achieved a better return than those investing in Irish company shares during the last 12 months and over the last five years.

These are among the latest findings from the IPD/Society of Chartered Surveyors index, which also shows that income returns from Irish commercial property averaged 2.3pc across all sectors in the three months to the end of September

In the same period, capital values fell by 2.6pc at an overall level as well as for the retail sector of the property market. Capital values for offices fell by only 2.3pc in Q3.

However, not all agents believe this as, for instance, CB Richard Ellis believes that office yields narrowed in Q3, suggesting that values may be improving.

IPD also calculates that income returns from offices improved 2.4pc and as this more than offset the slower fall in office values, this segment achieved an overall return of 0.1pc.

Retail achieved an income return of 2.1pc but an overall return of minus 0.6pc. While industrial showed the strongest income return of 2.7pc, it also suffered the sharpest fall in capital values and consequently the sharpest fall in overall returns -- down 1.3pc in Q3.

But these falls are much more modest than those in Irish bonds and equities.

During the three months Irish equities fell 5.5pc, resulting in an annualised total return of minus 17.6pc over 12 months and 14.8pc over five years, mainly due to the losses suffered on the shares of the four Irish banks.

Then again, three of these banks suffered due to their lending for development land whereas the IPD index is confined to investment in developed rather than undeveloped property. Overall property returns for three months were only minus 0.3pc, minus 4.2pc over 12 months and minus 5.5pc annualised over five years.

This was also better than Irish bonds during Q3 whose returns fell 5.8pc although over five years bonds are achieving a positive return of 0.8pc per annum.

SCS president Peter Stapleton said: "Despite the overall falls this quarter, yields of prime, well-let city centre properties are stabilising. We expect that the market will produce more supply of investment property during 2011 which will satisfy some latent demand from cash buyers. "

Irish Independent