Investors amass €30bn in assets

WEALTHY Irish investors have amassed up to €30 billion in assets over the past 10 years, dealing in commercial and retail property for the most part.

There may have been a smattering of residential but overall Bank of Ireland reckons the bulk of that €30bn figure was attributable to significant investment in the commercial and retail sectors.

The bank warned, however, that the days of big killings on overseas property were over and it has forecast more modest returns.

Investors have acknowledged this, with the bank’s figures showing a significant shift to equities.

In the year 2004-2005, the percentage growth in equity investing rose just 16%, while the level of money going into property rose by almost 150% as high net worth individuals still saw property as the Holy Grail.

However, in the past year the bank said the increase in equity investment was 57% against 34% for property.

Its wealthy clients will invest over €1bn in property and equities and the bank is advising clients to put no more than €300 million of that into property.

‘High net worth individuals’, from a Bank of Ireland perspective, start with 1m in the bank.

Below that, the bank with the biggest private banking arm in the country doesn’t want to know.

Looking to the current year, Bank of Ireland Private Banking director Peter Collins said the days of super-normal returns from property were over.

They were driven as economies moved from high inflation to low inflation environments.

That transition has been completed and with interest rates and inflation rising, “we believe that commercial property has made this transition and we are entering a lower and more normal return environment”, he said.

Bank of Ireland Private Banking managing director Mark Kavanagh said significant opportunities exist for overseas investors.

However, the bank sounded a warning on Eastern Europe, where yields of 6% look to be high risk relative to similar or better returns from the Asian economies that are underpinned by strong population growth and good economic prospects.

In that context, it could be argued that some of them may be experiencing “bubble” conditions, he said.

In its assessment, the bank said it still favours Britain, France, Belgium and Scandinavia as core investment opportunities.

Further afield, it is also looking at Asian markets, but will enter them only on a joint venture basis. The US ought to be considered for the diversification it brings to a property portfolio.

Finally, the bank said property “is fully valued, but not overvalued” and rental growth will drive future returns.