Archive for March 28th, 2013


Yesterday, property services powerhouse CBRE published a statement on the Irish investment property market. The “investment property market” comprises both residential and commercial investment and is a little bit artificial, for example the €100m Google purchase of Montevetro in 2011 is not regarded as an investment because Google is occupying the property. The Kennedy Wilson purchase of the iconic Allianz building in the Gasworks in Dublin – that’s the donut shaped block of apartments which was constructed in the former gasworks – is part of the “investment property market” even though it relates to residential property, but CBRE exclude smaller buy to let investments. So, it is an artificial measure but tries to convey the state of the property market and the attitude of investors, and for that, it is useful.

CBRE says that the Irish “investment property market” was worth €275m in the first three months of 2012, and that compares with a market worth €545m in all of 2012. There would appear to be a little slippage with figures here, with previous estimates for 2012 being in the €700m range, it seems some sales which were expected to close in 2012 actually slipped into 2013. The peak in 2006 saw €3bn of investment property transactions, so we’re way off those heady days, but we are up on the circa €50m in 2009. In December 2011, Minister for Finance unleashed a giveaway budget for Irish commercial property with stamp duty slashed from 6% to 2%, capital gains tax incentives and the abandonment of the Government commitment to abolish Upward Only Rent Review clauses in pre-February 2010 commercial leases.

We already know from the Jan/Feb 2013 bi-monthly CBRE report what the main investment sales have been this year, but to recap, they’re Bishops Square just off St Stephens Green sold for €65m to US investor King Street, and the sale to German fund GLL of two adjoining buildings on Grafton Street for a reported €40 million, the sale of St. Martin’s House in Baggot Street, Dublin 2 to German investors for a reported  €22.5 million, the sale to an overseas investor of the SAP office building in Citywest for  €14 million, the sale of an office building on Burlington Road, Dublin 4  for  €13.1 million and the sale of a 62 apartment development off the North Circular Road in Dublin 7 for  €9.6 million to an Israeli investor.

So the 2013 figure of €275m is very good news indeed, the downgrade of 2012 to €545m is less good news though it’s still way above the 2009 low of €50m. CBRE was its habitual chipper self in the last bi-monthly report and there is no doubt that there is substantial investor interest in Ireland at present, the question is whether that will translate to completed sales.


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Economically and politically, it is sensible for Cyprus to remain within the euro and to repair its banking system as soon as possible. But as banks re-open in just under an hour, Cypriots who have been without a counter service for 12 days are set to mob banks, seeking the maximum daily withdrawal of €300, compared to €100 at ATMs. After all, a 40% haircut on €100,000+ deposits at Bank of Cyprus and 80% at Bank Laiki might just be the first steps with dealing with the crisis. Next week, the authorities might target other banks and co-ops and they might even target sub-€100,000 deposits, after all they have form and agreed to impose levies on such deposits a fortnight ago.

Capital controls.
Reporting across reliable old media indicates that customers will today face a counter withdrawal of €300, there is a €1,000 limit on cash taken out of the country – yes that’s just 2 x €500 notes – the cashing of cheques is banned outright, use of debit or credit cards outside Cyprus is limited to €5,000 per person per month, businesses can make payments of €5,000 per day, and there is a state committee that would make North Korea proud which will approve business payments of €5,000-plus.

Human instinct would indicate people will withdraw the maximum from their accounts amid the instability and out of concern that the authorities will return for a new dip into their deposits, and there will be maximum attempts to bypass the capital controls as households and businesses consider their own welfare. Sadly the ECB is a secretive organization, so we shouldn’t expect updates on additional funds provided by the ECB to Cypriot banks, unless the news is good. Latest figures from the ECB indicate that €9-10bn of emergency liquidity assistance was provided by the ECB to Cypriot banks on 15th March 2013.

The estimation on here is that over €500m a day can be withdrawn from the Cypriot banking system and if that continues, then it will be the week after next when the ECB shouts halt to its provision of assistance at which point, ECB exposure to Cypriot banks might be €27bn, that in an economy of €18bn GDP.

Will Cypriots remain irrational a lot longer than banks can remain solvent? The betting on here is yes.

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