Irish interest expected at British auction

Sunday Business Post - Property Pages - Feb 18, 2007

Irish investors are expected to be among the bidders at a Savills auction of 63 commercial properties in London on February 26th. A wide range of properties in towns and cities all around the UK will go under the hammer, including retail units, warehouse space and offices.

Among the lots is a parade of seven modern ground floor terraced shops in Cambourne, Cambridgeshire with a guide price of £2.7 million to £2.9 million and a combined annual rent of £168,040, and a 522 square metre warehouse unit in Feltham, Middlesex with a guide price of £1.15 million to £1.2 million and rent of £72,844 per year.

There is also an ASDA leased unit and car park located in the village of Carcroft, South Yorkshire with a guide price of between £3.3 million and £3.6 million and an annual passing rent of £168,000.

According to James Cannon, head of commercial auction at London based auction house Savills, interest in British commercial investments remains strong among Irish buyers.

“The Irish are very entrepreneurial when it comes to property investment, they go for value whether in small or large investments,” he said.

Cannon said that Irish investors were interested in a wide range of different properties.

“The London area is still very popular,” he said. “You will find a lot of Irish investment in West London, and also in areas which have a historical affiliation with Ireland, places like Liverpool, Cardiff and Glasgow.”

Locations linked by low-cost airlines with Ireland were also very popular with Irish investors, who visited regularly to keep an eye on how their properties were faring, he added.

Cannon said that Irish investors were drawn by prices which are attractive compared to those at home.

“The average price in the UK commercial market is about £650,000 and the average in the residential market is about £250,000,” he said.

The current interest rate climate in the UK is similar to that in Ireland, and this is having a similarly calming effect on property prices at present. Regular hikes over the last twelve months have made borrowing more expensive. The Bank of England rate is now 5.25 per cent and Cannon said that he expected it to climb towards 6 per cent in 2007.

Rental yields were also predicted to fall slightly this year. However, Cannon said that these were still quite favourable compared to those derived from similar properties in Ireland.

“You are probably going to get a yield of between 5 and 5.25 per cent,” he said. “This is still a healthy return, but not as stellar as in 2006.”

When property appreciation is added in Cannon said that investors who take on a UK property should expect a total return in the region of 10 to 12 per cent in 2007.

Another factor which drew Irish investors to the UK, said Cannon, was the relatively cheap cost of concluding transactions, which made it easier for the investor to get in and out of a property in a short space of time.

“Irish investors see that transaction costs in the UK are much cheaper, typically around 4 per cent compared to maybe 8 per cent, and therefore people can trade,” he said.

Savills is the third largest auction house in the UK and transacted £412 million of property in 2006, up from £278 million in 2005.

Last year the firm sold a total 1,171 lots, with an average success rate of 87 per cent and an average lot size of £352,000.