IRELAND - Irish commercial property repricing has set in hard, as the total return on the SCS/IPD Irish quarterly index fell by 13.9% over three months to end of September, making it the lowest quarterly return in the index history.
Year-to-date returns are now at -21.2% compared to -6.2% for the previous quarter, while annual total returns over the last three years to September 2008 fell to 6.1%, mainly because of the dramatic -15% capital value slide.
"These numbers confirm the losses expected by the market for several months. This dramatic period of property repricing has been underway for some time, predicated by a widening gulf between investor confidence and real estate fundamentals," said Angela Sheahan, head of indices at IPD.
All Property yields contracted for the fourth consecutive quarter, with a detraction of -15.4%, which forced down the three-year annualised yields impact down to -2% compared to 4.4% as at the second quarter.
"Yields have been pushed down a huge amount so there was a correction due to bring yields up to a more sustainable pricing level," said Sheahan.
Commenting on why Ireland has seen such dramatic commercial property repricing, Sheahan said: " There was no incentive to buy property for the income. We would have to take a gamble on property values going up."
Income return, however, delivered the highest quarterly income return recorded since Q1 2006, at 1.2%.
Total returns on the All Retail index fell by -17.3%, owing to a -18.1% decrease in capital growth for the retail sector. Capital values for Offices and Industrials fell by -13% and -10% respectively.
The SCS/IPD Irish quarterly index is based on a €4.5bn sample of 327 properties from 12 portfolios.