Irish investors have become increasingly active in the UK property market over the last four years and are now an established and targeted buyer of investments there.
UK agents often class their sales product as "typical Irish kit", normally referring to properties with long leases to good covenants, but in too many instances they are properties which offer limited rental or capital growth potential.
With experience and proper advice, Irish investors have become more sophisticated, and are less likely to settle for bank sale-and-leasebacks in small towns, sold at auction. The Irish were the most active European investors in the UK during 2000. In world terms, our second position is shared by Australia, with only the Americans acquiring more property in the UK last year - mainly through corporate deals.
Overseas buyers account for 25 per cent, or £7.1 billion sterling, of the total UK property investment market. Irish investors spend 7 per cent of this figure, or £500 million, which is significant - as total investment turnover in Ireland amounted to £520 million last year.
The signs indicate that 2001 will be even more significant. A particular example is the Goldman Sachs building in Fleet Street. This was recently acquired at a cost in the region of £240 million by an Irish syndicate made up of Green Plc and a group of private investors.
Currently, the most active Irish investors are private individuals - high net worth investors - acquiring large prime assets predominantly in central London, the south east and other pockets of interest, including Edinburgh.
Lot sizes generally range from £5 to £30 million, where only one or two investors are involved. Syndicates, arranged by intermediaries such as accountants, fund managers or private banks, are also very active.
These syndicates offer the investor many advantages, including access to a share in the value of large properties, which they would not normally be in a position to acquire. Returns on equity sought by investors tend to be in the mid teens, as most are quite risk adverse.
Groups of investors coming together through either coownership agreements, property-specific unit linked funds or companies, are active in lot sizes ranging from £3 to £100plus million - although the most popular lot size would be £5 to £10 million.
Although not all purchasers are debt driven, and some Irish institutions have been and continue to be active in the UK, the majority are taking the opportunity to buy self-financing investments, exploiting the arbitrage between long-term interest rates averaging 6.5 per cent, while yields average 7.5 per cent.
Also, many people with smaller sums to invest - who traditionally built up a portfolio of apartments or houses - have effectively been excluded from the Irish residential investment market by anti-investor legislation. Commercial property syndicates in both Ireland and the UK are now a more accessible and attractive option. Our unprecedented economic growth has generated significant wealth - of which the cash benefits are in many cases only now reaching people's pockets.
Even if the pace of our own economic growth slows, the wealth created will require a home. With volatility in the stock markets and some sectors of the Irish property market showing signs of slowing growth, the trend to invest overseas and particularly in the UK is likely to prevail.
Denise Turner BSc, MRICS, ASCS, MIAVI is an Associate Director with Hamilton Osborne King, responsible for their clients' UK property investment acquisitions
