THE Irish property investment market continues to reflect a steady performance. All property returns for the three months up to the end of September grew by 4.1 per cent - the same return as in the previous quarter.

The performance means that for the year to the end of September, the market has produced a return of 16.2 per cent.

The Irish Property Index, published today, shows that rental values have continued to grow, rising by 4.6 per cent in the past 12 months.

This, in turn, has contributed to a 7.4 per cent increase in capital values.

The Irish market continues to outperform the UK with an annual return of 16.2 per cent compared with 7 per cent in Britain, according to the Irish Property Databank (IPD) monthly index.

Of the Irish investment asset types, equities remained at the top with a return of 26.5 per cent, but property once again ranked ahead of gilts, which returned 13.7 per cent over the year to September.

In the third quarter of the year, property rental values rose by 1.5 per cent, 0.3 of a percentage point more than in the previous quarter. This combined with a slight fall in yields to produce a capital growth of 2.1 per cent - the same as in the second quarter.

Retails and industrials tied as the top performing sectors of the market for the third quarter, both recording total returns of 4.4 per cent.

Offices slipped into third position with a total return of 3.8 per cent.

The third quarter has seen continued capital growth for industrials, though to a lesser extent than in the previous quarter.

Capital values rose by 2.1 per cent, down 0.7 of a percentage point on the previous three months.

Capital growth in this sector was largely attributable to the significant increase of 1.6 per cent in rental values, while yields remained virtually static.

The retail sector, recording a total return of 4.4 per cent, was the only sector out of the three to improve on its previous quarterly return. The improvement of 0.7 of a percentage point resulted from capital growth of 2.5 per cent. Rental values increased to the same extent as for industrials but capital values were further enhanced by a fall in yields of 0.10 of a percentage point over the last three months.

After a strong performance in the second quarter, the total returns from offices dropped by 3.8 per cent. Capital growth at 1.8 per cent and rental growth of 1.4 per cent were both below their respective figures for the last quarter.

The index, which covers 271 properties with a combined market value of more than £770 million, is compiled by the Irish Society of Chartered Surveyors and the IPD.