Dublin Investment Market –the future looks brighter
By Ciara Horgan
Divisional Director, Investment
The Dublin investment market has spent the past three years at a virtual standstill which has made it very difficult for agents and investors alike. Following last week’s budget, which was sympathetic towards the commercial property market, we can now look forward to a functioning market and clarification on where prime yields really do lie as opposed to speculation.
The Government’s budget was wholly positive for commercial property in that it introduced three key measures, which will kick start the market. Firstly, as previously suspected, Stamp Duty on commercial property has now reduced from 6.00% to 2.00%; this brings Irish Stamp Duty for the first time below the UK, which is currently at 4.00%.
Secondly, Capital Gains Tax Relief is available to investors who acquire property between now and the end of 2013, albeit when the property investment is held for 7 years before disposal.
The third and final key measure introduced is the confirmation that the plan to abolish upward only rent reviews has now been scrapped following pressure from NAMA and other parties. Lower Stamp Duty, Capital Gains Tax Relief coupled with the scrapping of proposed rent review legislation will boost investment as it will enhance price levels and remove tenant income uncertainty from the marketplace.
There are two prime office investments currently in the market, One Warrington Place and Riverside II. One Warrington Place, arguably not as prime as Riverside II, is rumoured to be entering into exclusive due diligence with a Financial Institution.
Riverside II has attracted investor attention from both domestic and non domestic investors and is embarking on a final round of second bids. This proves that there is plenty of cash waiting to invest in Dublin and a strong sense of belief in the investment market as a whole. Investors will positively benefit from potentially reduced stamp duty and clarification regarding the rent review legislation. The Dublin investment market is waiting with much anticipation for both deals to complete and a prime office investment yield to be officially confirmed.
Lessons have now been learnt from the past and current indicated prime office yields are well above the 30 year long term average of 6.00%. Dublin’s long term average prime office yields should always be in line with large regional cities in the UK and France and not to compete with investment strong holds such London and Paris. 2011 has been a challenging year so it is time to now look towards a functioning investment market worthy of a capital city such as ours.
Going forward into 2012, we anticipate considerably more movement in the investment market. Fixed Charge Receivers and Financial Institutions will release commercial property for sale into a functioning market with willing buyers paying market values.