A new survey by the Royal Institute of Chartered Surveyors (RICS) has found that not only are current property prices in Ireland the worst in the world, but the outlook for Irish commercial property values is also dire...
After a decade of phenomenal rises, Irish property has hit its lowest level yet.
It's a far cry from those halcyon days when five of the ten counties with the highest house-price growth in the UK over the past decade were in Northern Ireland, with County Armagh's prices more than trebling.
Irish commercial property prices fell for the first time in five years during the first quarter of this year in what has been termed as an ‘unprecedented reversal' of the once buoyant market. Returns in the quarter were the worst since 1995.
Since the beginning of the year, the Irish property investment market has been characterised by a lack of transactional activity, with only £322 million of Irish investment deals signed in the six months to the end of June 2008 compared to £1 billion in 2007.
Irish investment in UK property plunged to £654million in the first six months of 2008 compared with £5 billion of investment transactions in the UK in 2007.
According to the RICS survey, the outlook for commercial property in Ireland is the worst in the world, with 10 per cent of survey respondents expecting Irish property prices to fall in the fourth quarter of the year for shops, offices and warehousing units.
This is despite efforts from the Irish Government to revive the flagging commercial and residential markets with a host of measures included in the 2009 Budget, one of which is cutting stamp duty on commercial property.
The universally unpopular tax has been lowered from nine per cent to six per cent, but it still remains still higher than the European average of five per cent and the UK rate of four per cent.
The lack of bank funding is continuing to cripple the Irish commercial property market, according to the final bi-monthly market update for 2008 of property consultants CB Richard Ellis.
CBRE says conditions in the Irish commercial property have continued to deteriorate in recent months against a backdrop of weakening economic indicators and financial market turmoil.
The property consultants say that some landlords have started to accept slightly lower headline quoting rents in addition to inducements such as rent-free periods and break options to secure lettings in their schemes. However, many occupiers are postponing expansion or re-location decisions until such time as economic conditions improve.
While 50 per cent of respondents to the RICS survey expect Irish commercial rents to fall in the fourth quarter, this is below the expectations for UK and US, where around 60 per cent expect rents to fall.
Ireland was also ranked worst in the world for property prices in the third quarter, a position it shared with Slovakia. In contrast Brazil was ranked best in the RICS survey according to 65 per cent of respondents, followed by the UAE and Nigeria.
Economist Patrick Koucheravy, of agents CBRE, said he was not surprised at the negative sentiment towards Irish prices.
"The survey partly reflects the increasingly negative international sentiment towards Irish commercial property resulting from the small scale of the market, the lack of international investor presence, and the relatively high rate of stamp duty prevailing up to last month," added Mr Koucheravy.
Report by Catherine Deshayes - The Move Channel.