In a slow but undeniable trend, Irish pension investors are tentatively taking steps back into the property market by adding property to their retirement portfolios.
That’s according to Independent Trustee Company who looked at where clients with self-administered pension schemes are choosing to direct their pension savings.
The pension experts, with €750 million in clients funds, outlined the main areas of client interest in 2013 as being deposits, property and broker portfolios.
“We’ve seen a significant pick-up in activity for both commercial and residential property and we believe this is down to several factors – first that the consensus from the major estate agents is that for prime commercial property in the major cities, prices have stabilised,” said Michael Keyes Director of the ITC Group.
“Secondly while residential property continued to fall in 2012, certain sectors of the market are showing positive signs. In addition, rental yields are averaging 8.8pc and the average residential property price of €140k.
“The one thing we haven’t seen is debt leverage. Lenders’ experience of negative equity and overall impairments has obviously affected their appetite to lend. Will lending to pensions happen again? Yes, I believe so, but in prime property and with lower loan to value ratios,” he added.
He said cash deposits are still popular for pension savers despite the downward trend in rates.
“What we have seen, however, is a shift from short term deposit accounts to the more long term which is mirrored by statistics from the CSO where deposits from Insurance Corporations and Pension funds increased by 6.9pc in 2012, shorter term deposit rates (less than 2 years) reduced from 3.57pc in Jan 2012 to 3.35pc in Nov ’12 and longer term deposit rates (more than 2 years) increased from 2.37pc to 2.42pc over the same period. It’s no surprise that ARF clients are the biggest supporters of deposit strategies. Their age profile means that they have less appetite for risk. This has resulted in over 60pc of ITC ARF funds being held in deposits”.