Anyone who has picked up a newspaper or watched the news over recent years will know that Ireland’s economy has been precarious to say the least. During the global recession of 2008, the ‘Irish property bubble,’ burst. Between 2008 and 2010, property prices across Ireland fell by around 35 per cent and the number of approved housing loans fell by 73 per cent.
The commercial property market on the emerald isle has been dealt another blow this week, with the government announcement of plans to ban upwards only rent reviews in existing commercial property leases.
Jack Fagan, of the Irish Times, wrote: ‘Overall the impact on the Irish commercial property market could be quite severe, leading to a fall in values of possibly 20 per cent. The uncertainty about the Government’s rent review policy has already triggered a 5.3 per cent fall in capital values in the three months up to the end of June – the sharpest decline since the nadir of the market downturn. Overall values have now fallen 63 per cent.’
A study compiled by London based research organisation, Investment Property Databank (IPD), has declared that overall returns on the Irish commercial property market decreased by 3 per cent over the course of quarter 2. IPD cited the government’s ambiguous rent review policy along with economic uncertainty as a reason for this fall in commercial property returns.
According to the IPD study, carried out in conjunction with the Society of Chartered Surveyors Ireland, has declared that the office sector is the area of the commercial property market which was hardest hit during the last quarter. The study stated that office rental values have fallen by 5.8 per cent.
Malcolm Hunt, UK and Ireland Client Services Director, for IPD, has been rather scathing towards the government in regards to the possible rent review policy, stating that commercial property loan note holders will be very concerned and are keeping a very close eye on the situation.
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