Irish property returns lowest since 2009

Irish commercial property returns have fallen back into negative territory in the second quarter, to -3% – their lowest rate since September 2009.

Figures from the SCSI/IPD Ireland Quarterly Property Index show that capital values fell a further 5.3% in Q2. This was their sharpest decline since the beginning of the market downturn. Cumulatively, values have now fallen 63%.

IPD’s director of UK and Ireland client services, Malcolm Hunt, said the decline was the result of fears of contagion from the continuing eurozone crisis and uncertainty surrounding the government’s retrospective rent review.

“While there are arguments both for and against the controversial policy, research conducted by IPD has found that the retrospective abolition of upward-only rent reviews could potentially wipe €79m (£70m) from income immediately,” he said.

“The impact on Irish commercial property could be severe, seeing values fall by a possible 20%.”

Rental values in the index continued to fall, recording declines of 5.5% during the second quarter and taking the cumulative rental value falls since December 2008 to -43%.

The industrial sector reported the biggest fall in capital values, 5.6%, followed by offices at 5.3% and retail with a 5.1% drop.

“While a government announcement regarding rent review policy is expected any day now, the uncertainty in the market is having a dire effect,” added Hunt.

“Speculation about the effects of such a policy, amid continuing chaos in the eurozone, is clearly still affecting commercial property performance. Values in Ireland are therefore suffering from declining occupier demand and extremely nervous investor sentiment.”