Low interest rates will continue to underpin Irish property investment in 2004, despite pressure on rents in some sectors from higher supply and slower economic growth, AXA Real Estate Investment Managers said yesterday.
AXA Reim recommended investors take a neutral to overweight stance in Irish retail property. Retail yields continue to edge downwards against a background of positive rental growth and a shortage of space in prime shopping areas that saw returns of around 17 per cent up to the end of September last.
However, with retail yields as low as 3.5 per cent the scope for further falls and so higher prices is limited, it added.
Available space in the Dublin office market continued to increase last year and reached a record high with a vacancy rate of 16 per cent, prompting AXA Reim to take an underweight stance in the sector, relative to the benchmark investment Property Databank (IPD) indices.
Almost two-thirds of this vacant space is located in the suburbs and flexible lease conditions are helping to stabilise rental values in the prime central Dublin market.
Although an increase in Stamp Duty to 9 per cent from 6 per cent in the last Budget has negatively affected returns, increasing Irish investor's appetite for UK and continental European property, office investment returns were still a respectable 8.6 per cent in the first nine months of 2003. Prime Irish office yields are now about 5.5 per cent, it said. - (Reuters)
