Irish investors plan move away from property

Almost half of Irish investors intend on reducing their portfolios' property allocation, a new report said today.

Only 11 per cent of those surveyed said they would be investing further in property, compared to 48 per cent who said they would be reducing their allocation, by reducing it by an average of 8 per cent.

This compares to a global figure of 35 per cent who intend to making greater investments in property, versus 17 per cent who plan on decreasing its importance in their portfolios.

The report by Barclays Wealth, and the Economist Intelligence Unit looked at on attitudes of wealthy investors towards residential and commercial property investment.

Irish investors are still more exposed to property than the global average, with an average allocation of 52 per cent at present, compared to 28 per cent globally.

The head of Barclays Wealth in Ireland, Pat McCormack, said even the reduced allocation of 44 per cent would be "significantly higher" than recommended.

"This suggests a need for Irish people to seriously consider diversifying their portfolios in order to reduce risk. We would also apply this to investors outside Ireland who claim to hold 28 per cent of their portfolio in property," he said.

Irish investors were also more pessimistic than their overseas counterparts. More than 90 per cent of respondents said the value of their property portfolio had fallen by 20 per cent or more over the past two years, and 70 per cent said prices would remain the same or fall over the next two years.

More than 70 per cent of those who participated in the survey said opportunities existed in both residential and commercial property markets, but many felt a lack of credit would make taking advantage of them difficult.

"This may reflect an emotional affinity to property, or investors' belief in their ability to pick individual 'winners'. Either way investors in Ireland need to consider their broader asset allocation as balance should be sought for what they already hold in property. In diversifying it would also be wise to balance things geographically so in most cases casting the net beyond Ireland would be appropriate," Mr McCormack said.

Globally, 76 per cent of those surveyed said they believed there were opportunities in the property market. Some 68 per cent said they were optimistic about commercial property, with investors also expecting high rental returns from residential property investment.

However, commercial property is the sector that has delivered higher rental returns, indicating that the expected returns would not be realised.

Some 25 per cent of investors still believe property has better long-term prospects than other asset classes while 23 per cent believe it is undervalued.

"The tumble in property values has shaken even the most seasoned investors' confidence. Despite this, these findings suggest that investors believe we are approaching the beginning of the end of the downturn. It appears that those surveyed globally are prepared to not only exploit undervalued opportunities, but also to commit further to property over the next two years in the belief that they will benefit from favourable returns," said Barclays Wealth's EMEA head of investment strategy Kevin Gardiner.

"However, whilst there seems to be a good deal of confidence emerging, investors should ensure that they don't over commit themselves, or concentrate their property portfolios too narrowly, whilst there is still a degree of volatility in the markets. Wider market data suggests that initial indications of recovery in property could be a false dawn, or the start of a slow upturn. The next 12 months will be crucial in getting a clearer idea of what the longer term property investment landscape will look like."