COULD CAPITAL values in the Irish commercial property market finally have bottomed out?
That possibility has resurfaced following a finding by Jones Lang LaSalle in its quarterly Irish Property Index that values rose by 1.2 per cent in the last three months of 2011 – the first time they have been in positive territory since the third quarter of 2007.
JLL attributes the marginal recovery to the 4 per cent reduction in stamp duty in the December budget – a change that technically triggered a 3.8 per cent increase in values. Had this not occurred, the underlying fall during the final quarter would have been minus 2.6 per cent. During 2011 as a whole, capital values fell by 10.1 per cent.
Hannah Dwyer, research analyst with Jones Land LaSalle, said that while the increase in capital values appears positive, the fact that overall they had fallen by 63.8 per cent since they peaked in the third quarter of 2007 could still not be ignored.
“Plus, with remaining economic uncertainty across Europe, it would be naive at this stage to assume this shows the market has started recovering. There are, however, signs of some stabilisation in the pace of fall, with a lot of bad news already priced in.”
She said another important factor was the Government’s clarification that it would not be proceeding with legislation to retrospectively ban upwards-only rent reviews in existing leases.
The property market performed poorly last year as it paused for almost 12 months while investors and occupiers awaited the Government decision. “As a result we are confident of a resumption of market activity during 2012, which should help to establish market-led capital values.”
The Irish Property Index showed overall returns were up 3.6 per cent in the final three months of 2011 – distorted by the rise in capital values – but in the year as a whole, the returns were minus 1 per cent. This was somewhat better than the decline of 1.6 per cent in 2010 and a drop of 19.2 per cent recorded in 2009.
Income in the portfolio – based on real property investments – declined by 1.1 per cent compared to the previous quarter and by minus 7.2 per cent in the year as a whole. Rental values slipped by 10.2 per cent in 2011.
