Dramatic Irish commercial property re-pricing sets in

The index showed that the falls this quarter eclipsed the record quarterly returns fall posted the previous quarter while the year to date total returns now stand at -21.2%,‘wiping out gains accrued since Q3 2006’.

Annualised total returns over three years to September 2008 are significantly down compared to the previous quarter, at 6.1%.

‘Unsurprisingly, the bulk of the damage came from a dramatic -15% capital value slide over the three months, cementing the fourth consecutive quarter without any capital value gains,’ it said. ‘Marginal insulation was provided by the highest quarterly income return recorded since Q1 2006, at a modest 1.2%.’

All property yields also contracted by -15.4% for the fourth consecutive quarter forcing down the three-year annualised yield impact into negative territory, at -2%, compared with 4.4% at the end of the second quarter.

All property equivalent yields, which compare investment valuations across different market segments in any one year, have risen to their highest level since the first quarter of 2005.

Total returns on the all retail index fell by -17.3%, owing to a -18.1% decline in capital growth for the hard-hit sector. The scale of the third quarter losses has pushed down the three-year annualised total returns to 3.8%, compared to 12.6% for the equivalent figure for the end of June.

Capital values for offices fell by -13% and for the industrial sector by -10.1%.

IPD head of indices Angela Sheahan said: ‘These numbers confirm the losses expected by the market for several months. This dramatic period of property repricing has been underway for some time, predicated by a widening gulf between investor confidence and real estate fundamentals.’