Irish investors running shy of UK property due to sterling's strength

Interest in the UK market has dipped since the two currencies separated to near record levels over the past six months, according to agents specialising in UK investments. Irish investment figures, which were worth between £500 million and £600 million sterling last year, are not expected to reach such levels this year. However, foreign investment in the buoyant UK market is expected to grow from its £10 billion level of last year. The keen interest from the South in the Northern Ireland investment market of recent years is also reported to have dried up almost completely.

Patrick Delaney, director of UK investments with Gunne Commercial, said interest in UK opportunities remained hard even while the pound was still at around 82p or 83p sterling. The fall to 77p sterling has seen a significant weakening in interest.

The fall in the exchange rate has also combined with more circumspect lending by banks. "Investors are having to cough up more equity. If you have a property of say £4 million sterling and you are only getting 75 per cent, the investor is going to have stump up £1 million sterling or £1.298 million Irish pounds.

"At one point, when an Irish investor was looking at 15 per cent equity, you might have only been looking at £600,000 Irish pounds."

Agents agreed that the UK market is strong, and still attractive for the private investor. But the "bargain hunting" from 1995 to 1997 produced extremely good value in investments, according to Mr Delaney. Quality property with blue chip tenants could achieve around 8 per cent yields. "There is still excellent value and growth factor in the UK will probably surpass Ireland from here on out. The view is there is going to be better growth," he said

Gunne pointed to the yield of seven per cent on a £4 million sterling office investment in Bedford Square, in the Bloomsbury area of central London, in which they acted for the private Irish investor, as evidence of the continuing good value from prime investments.

SOME ill-advised Irish investors in the UK market, particularly those who bought at auction, might be facing much poorer returns than they would have expected if they had invested in the Irish market over the past three or four years, agents report.

Unlike the Republic, auctions are used in the UK to dispose of properties at the bottom end of the market. Many of these auctions attracted private Irish investors in recent years. According to agents, some of these investors, who had not taken advice from agents with in-depth knowledge of the UK markets, have lost out.

One sector was investments in high street bank buildings. The onset of the ebanking market and closure of many of these outlets has adversely effected this market.

William Fennelly, of the Lisney agency, pointed out that with the relatively high UK interest, investors are having to look at yields of at least 7.5 per cent in order to "wash their faces". But there is continuing Irish interest, he reported.

"The more experienced investors are still in the market. And there are also investors still trying for flip contracts, buying things which they perceive to be cheap and selling on. But the rush has petered out.

"The English market is quite different from here. The prime property tends not to be advertised and transactions tend to be agent-led. In Dublin, we auction the very good property. In England, it tends to be the secondary and tertiary property going to auction.

"It is extremely important that investors appoint experienced agents. The UK market is huge and complex. All good agents tend to specialise. There are several different types of specialist even within a relatively small area like the West End of London."

Paddy Brennan, head of UK investment with Lambert Smith Hampton's Belfast office, who has handled a significant amount of Irish investment in the UK in recent years, reports that southern interest in the Northern Ireland market has virtually dried up.

"Their money is in punts, so they are losing the guts of 30 per cent. They are borrowing in sterling but they are using assets at home. I think it (the exchange rate) is definitely having an impact. There is not the same interest as there was even six months ago."