Irish put 52% of savings into property

An international wealth survey finds Irish investment portfolios packed with property, writes EMMA CULLINAN

IRISH INVESTORS put more of their money into property than their counterparts abroad, according to a survey by Barclays Wealth. Barclays interviewed 2,000 high-net worth people across 11 countries who have between €500,000 and €30 million to invest for the report Wealth Insight – Prospects for Property.

While the proportion of investments in property averaged out at 28 per cent, Irish investors typically have 52 per cent of their investments in property. The Irish people interviewed say they plan to reduce this to 44 per cent, partly because of the recent scare, following the crash, and perhaps on advice from Barclays who advise people to diversify more, pointing out that as a long-term bet property isn’t necessarily the best performing investment. It does say however that it forms a crucial part of a portfolio.

So was Barclays advising its investors to spread their portfolios before the property slump? Pat McCormack, head of Barclays Wealth in Ireland, says they have consistently done this although they haven’t been in the property area of the market in Ireland for long. He says that many of Barclays’ clients did get out in time and that many of them are still very wealthy.

Over 90 per cent of the Irish clients surveyed said that the value of their property portfolios had fallen by 20 per cent or more over the past two years. However that is well short of the total crash that some investors have experienced.

McCormack says that those who fared best were people who had been investing in property for a long time – during the 1960s, 70s and 80s – and those who had experienced the London market in the early 1990s and so had experience of what could happen.

“When these investors were being outbid on sites in Ireland, at a price that they couldn’t build on it for, they knew it was time to lock up shop and take the money.”

Kevin Gardiner, head of investment strategy EMEA at Barclays Wealth, points out that Ireland is more prosperous, and there is more wealth per head of population, than 15 years ago.

Gardiner coined the phrase “Celtic Tiger” in a report in 1994, before the property boom. He says the wealth creation areas at that time were: Ireland’s low-corporate-tax regime; a government that welcomed foreign direct investment; the fact that it is an English speaking country; and because Ireland is small so that when a new factory opens here it has a big impact on the country’s wealth.

These factors, he says, will be part of a revival in our fortunes.

Gardiner is reluctant to call the bottom of the property market here but says that it has hit the bottom in other parts of the world and that people are investing in prime locations in London again, as well as in the US and China.

“The next 12 months will be crucial in getting a clearer idea of what the longer term property investment landscape will be like,” he says, and “while there seems to be a good deal of confidence emerging, investors should ensure that they don’t overcommit themselves, or concentrate their property portfolios too narrowly”.

He advises people to go against their tendency to invest in what they know – property in their local area – and to spread their purchases geographically. The reason why the Irish like to invest in property is partly because they have an emotional affinity for it, says McCormack, who says that Barclays now has a behavioural psychologist on its staff.

Work done in this area includes getting financial advisers to look at why people often invest against their personality type. People tend to go into property investment because they see it as a safe bet and yet they are so cautious they will only invest as the market rises – or at its top – and will then sell quickly as it falls.

Despite being seen as a cautious way to invest it can be, ironically, risky, and is not a good way to make money.

The psychologist may also be able to explain why women are more keen on property investment than men – 44 per cent of women interviewed said they actually enjoyed buying property whereas only 28 per cent of men said this.