Property investors focus on Dublin

Dublin will be the second most attractive market in Europe for property investors over the next year, according to a major new study.

The report, which was carried out by the Urban Land Institute and PwC, found that investors are becoming increasingly uncomfortable with taking more risk in search of returns.

“One of the biggest beneficiaries of this is Dublin, which has risen dramatically in the city investment rankings, moving up from 20th in last year’s report to second in 2014,” said the report.

“Dublin’s real estate market has been transformed from a “no-go” location among investors two years ago, to being one of the hottest markets in Europe, with domestic and international investors attracted by pricing levels and Ireland’s improving economic outlook.

“The report finds that 51% of respondents now see good buying opportunities in Ireland,” it said.

The world’s most powerful central banks have all lowered interest rates to historically low levels over the past few years in an effort to stoke economic growth. This has had the effect of pushing down yields across most asset classes. Consequently, investors are moving into much riskier assets in search of yield.

The report also found investors were once again looking at the Spanish real estate market. Spain and Ireland suffered the two worst property crashes in the EU. And in view of the dearth of prime buildings, investors are also looking at developing suitable office and commercial property.

The top five locations for the next year are Munich, Dublin, Hamburg, Berlin and London.

Two real estates investment trusts have been launched since last August. Green REIT raised €300m for investment in the Irish commercial property market. Hibernian REIT raised €365m for similar purposes.

“Opportunities [in Dublin] for investment will be limited due to the size of the market. Office prices have increased significantly over the past 12 to 18 months in prime locations such as the docklands, and local investors are predicting a further rise of 10% in 2014,” said Timothy O’Rahilly, Real Estate Partner, PwC Ireland.

“Survey respondents highlighted there was significantly more equity available and that bank debt was becoming available again for the right assets and investors,” he said.

The report will be welcome news for the Government. KPMG, which is the special liquidator of IBRC, is in the process of selling the loanbook of the former Anglo Irish Bank.

Minister for Finance Michael Noonan told the Oireachtas Finance Committee on Wednesday that he expects about €6.5bn of the €12.5bn loan book to end up in Nama. Source: The Irish Examiner.