Slowdown in total returns on SCS/IPD Irish Quarterly Index in Q4

The total return on the SCS/IPD Irish Quarterly Index fell to 1.0% in the fourth quarter of 2007 from the previous quarter, according to figures from Investment Property Databank (IPD). While the total return for 2007 was a robust 9.9% on the previous year, it was well below the 27.2% year-on-year total return achieved in 2006. In the third quarter, the index booked a 3.3% quarter-on-quarter return.

Over full-year 2007, Irish property generated a return of 9.9%, outperforming both bonds and equities. The annual total return was made up of a 3.9% year-on-year return from rental income and a 5.8% year-on-year growth in capital values. Capital growth was driven by a 5.4% year-on-year improvement in rental value and a slight fall in yields adding 0.9% year-on-year to capital values.

‘While recent turmoil in global financial markets has decimated other property markets, Irish commercial property is yet to see a fall in the all-property values,’ said IPD Research Manager Angela Sheahan in a statement. ‘The wealth of Irish investors means that sellers have not been forced to accept slashed prices. The uncertainty has, however, meant there has been a decline in the number of transactions and therefore a slowdown in total returns in late 2007.’

IPD figures showed offices were the best performing sector in Ireland for the second year running, due to consistently strong rental value growth in all four quarters. Favourable yield movements allowed industrial to come in second while retail was slightly below the other two as a result of less strong rental improvements and yield movements.

The SCS/IPD Irish Quarterly index is based on a EUR 5.9 bn sample of 324 properties from 12 portfolios.