Commercial Property – 2011 was a challenging year but light emerging for 2012
The latest report on the Irish commercial property market by DTZ Sherry FitzGerald suggests a more positive outlook for 2012, following a challenging year in 2011.
Commenting Marian Finnegan, Chief Economist, DTZ Sherry FitzGerald said “2011 marked the third consecutive year of market decline however the combination of measures introduced in Budget 2012 and the resolution on upward only rent reviews suggests that 2012 will be a year of improved activity.”
In reviewing the investment market, the DTZ report noted that activity levels remained very subdued in 2011 with only approximately €175 million of investment transactions in the twelve month period. A key issue in 2011 was the uncertainty and threat surrounding the proposed retrospective rent review changes which was laid to rest with the Ministers announcement in Budget 2012. The market needed clarity on this issue expediently and overseas investors, in particular, were frustrated by the lengthy delay in resolving this issue.
Another welcome measure announced in the Budget was the reduction in stamp duty for non-residential property from 6% to 2%.
Commenting Marian Finnegan, said “This combined with the increase in VAT from January will mean standard transaction costs will be approximately 4.46% down from 8.42% this year. This is a significant reduction in a market where equity is scarce and makes Ireland’s transactions costs very competitive. It should be noted that comparable costs in the UK are approximately 5.76%.”
The third measure introduced in the Budget which will benefit the market is the capital gains tax proposal. A capital gains tax incentive was introduced for property purchased between midnight December 6th and the end of 2013. If a property is bought during this period and held for at least seven years, the gain attributable to that seven year holding period will be exempt from capital gains tax.