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Last Updated:
Apr 24, 2009 - 5:31:05 PM |
Lack of bank funding continuing to "cripple" Irish commercial property market; Transactions down to €465 million in year to September compared with €1.6 billion in 2007
By Finfacts Team
Oct 1, 2008 - 7:07:52 AM
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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. According to the October bi-monthly report (should be available online from Wednesday) from CB Richard Ellis, transactional activity is continuing in some areas of the property market with some occupiers finding it an opportune time to be concluding lease negotiations, considering the relative value on offer in the current climate. 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.
Outside of the occupier markets, where there is still some activity, the lack of bank funding is having a very significant impact on levels of transactional activity in the development and investment sectors. Only €465 million of investment transactions were concluded in the Irish market in the first nine months of 2008 compared to €1.6 billion in the same period last year. Irish investors have been conducting very few transactions in the UK and are likely to invest no more than €1 billion in the UK in 2008, which equates to less than one fifth of the total spent in the UK by Irish investors last year. Transactions are also thin on the ground in the hotel and licensed property sectors, again primarily due to funding issues. CB Richard Ellis expect that only 10 pub properties will change hands in Dublin in 2008 compared to 19 in the same period in 2007.
At a time when Government finances continue to deteriorate, CB Richard Ellis says it is urging the Government to reduce the rate of stamp duty on commercial property which they believe will encourage some non-domestic buyers to consider purchasing property assets here. According to Marie Hunt, Director of Research at CB Richard Ellis
“Sovereign wealth funds and international investors continue to seek out investment properties across Europe. However, despite the price correction that has occurred in the Irish market since the beginning of the year, the exorbitant 9% rate of stamp duty prevailing here is likely to prove a considerable barrier to such investors. This issue urgently needs to be addressed by Government in the forthcoming Budget”.
In relation to the housing sector, CB Richard Ellis says that it remains to be seen what the Irish Government will actually do in the forthcoming Budget but there is no doubt but that easing the supply of credit to enable purchasers to get onto the property ladder is vital, particularly considering the inventory of unsold housing stock that exists across the country. The property consultants believe that up to 50,000 housing units will be completed in Ireland in 2008 but say that their estimate of 35,000 new housing completions in 2009 now looks ambitious considering the economic backdrop and most recent new home registrations data.
CB Richard Ellis expects to see an increase in the number of development sites being offered for sale over the course of the coming months as developers attempt to generate cash. They also expect to see an increase in distressed sales in this sector. Considering the value adjustment that has taken place in the land market during 2008, they say that there are a number of cash buyers watching this situation closely.
