Office and residential values suffered declines in 2022
The value of Irish investment properties fell in 2022 and the pace of decline accelerated in the last quarter of the year according to two key indices.
The larger index, MSCI/SCSI Ireland Quarterly Property Index which monitors over €9bn of direct Irish property assets, saw capital values fall 4.5pc in quarter four bringing the annual rate of decline to 6.2pc. This quarter also saw the worst quarter for capital values since September 2011, MSCI says.
This index is considered the authoritative monitor of the performance of the Irish commercial property market.
The longer-running but smaller JLL Property index reports similar trends and shows the decline over the last six months to 6.6pc.
It says that the fall came despite a slight rise in rents.
JLL says it was this sector’s first year-end annual decline since 2012 which it attributes to outward yield movement.
Max Reilly, chair of the SCSI’s Commercial Agency Group and director of JLL, attributed the softer market to increased interest rates which “have made investing more expensive, and investor return requirements have been adjusted to allow for the increased costs.
The cash buyers have also increased their return requirements as the opportunity cost also needs to be reflected”.
“The positive news… is that investors – local and international – still have a requirement to invest in real estate. However, it is now a matter of timing and the market producing a verifiable pricing base, through transactions, to reinstate stable values.”
MSCI estimates that the decline in office values was 7.8pc for the year.
Meanwhile, Colm Lauder of Goodbody stockbrokers said that Dublin 4 offices, which includes those in the Ballsbridge area, saw their values fall 12.4pc over 2022.
On the plus side “industrial property in south-west Dublin (was) the strongest as average values rose by 5.9pc, driven by continued robust rental value growth. The largest and most liquid investment market, central Dublin offices, posted a -4.8pc value decline in Q4, resulting in a 7.2pc (annual) decline,” Mr Lauder adds.
Retail values declined by 4.5pc in Q4 and by 6.2pc for the year. JLL’s index shows residential investment property values decline 4.1pc over the last six months of 2022.