Irish Property - Time to Buy?
As some clients will be aware we have been quite keen on Irish Property Funds for the last six months. There are signs that the Irish Property market may be beginning to turn. The recent arrival of international heavyweights such as Blackstone (purchase of the Burlington Hotel for circa €67m) and Kennedy Wilson (purchase of Gasworks for circa €40m) as well as others are very encouraging signs.
In 2012 over €600m of transactions were completed in the Irish market (source Aviva Investors).
Property as an investment has performed poorly in recent times but it is worth remembering that over the last 29 years property funds have returned approximately 8.8% per annum even including the massive downturn experienced in recent years (source Aviva Investors).
With the significant reduction in deposit rates in recent months we believe the Irish Property market is a good alternative for medium terms investment returns. All the funds detailed below are un-geared and deemed medium risk investments.
We currently favour the Friends First Commercial Property Fund for the following reasons:
- Down 70% in value terms since the peak.
- Yield still 7% plus
- This fund has lagged it peers (+4% YTD versus Irish Life +28% YTD). We believe that the spread between this fund and its peers will contract
- The fund is still valued on a disposal basis.
- The properties in the fund are good quality (mainly Dublin based)
We believe that this stage in the cycle represents a good buying opportunity and while potentially the market may soften further before recovery we believe that in the medium term that the outlook for the Irish Property market from current levels is very positive. Contact Paddy Mahony or Andrew Nevin on 01 498 0007 for any additional information including details Research Reports (internal and external).