Values fall but Q3 returns positive
Irish property has delivered positive returns for the fourth consecutive quarter, amounting to 4.8pc for the past 12 months, despite underlying property values continuing to decline, according to the latest IPD/SCSI survey of Irish investment property.
Total return for Q3 was 0.7pc, a small increase on Q2, and still higher than the 0.6pc delivered by UK commercial property. Indeed, over the 12 months Irish commercial property outperformed Britain, which returned only 3.5pc.
However, Irish values fell by a further 1.7pc for the quarter; values of commercial property have fallen 66.6pc since the peak. Income return, of 2.4pc, drove performance into positive territory for the quarter.
International investors are now being attracted by Irish income yields which are hovering around 9.7pc annually. "Nevertheless, investors remain reticent, as potential buyers will have to be extremely careful in their asset management to maintain cash flows," said Phil Tily, IPD UK and Ireland managing director.
Reversionary yields are only 6.7pc, as many leases were signed at the peak and when these expire, income on a number of properties will fall.
Offices were the strongest performer with 1.3pc return in Q3. Conversely, Irish retail continues to struggle, and was the only sector to record a negative return - down 0.1pc. With shakey tenant demand, retail rents fell by 1.5pc in the quarter.