Irish property firms could tap Brexit fallout as value of sterling falls again
Darren McKinley, senior analyst at Merrion Capital, predicted that property stocks such as Green REIT and Hibernia REIT — whose shares in the past year have failed to spark — could benefit from the Brexit fallout if UK firms were to relocate their bases here.
“With Dublin office rents currently much lower than that of London, we would expect demand from London to continue to push up rents in the short-medium term,” he said.
The broker said Green REIT was its “preferred buy” as the property firm seeks to sell non-core asset sales which may lead to it paying out a special dividend.
The broker has a ‘buy’ rating on the shares of Hibernia REIT too. Shares in Green REIT, which rose 0.5% yesterday, are, however, 4.5% down this month. Hibernia REIT shares climbed 1% and are down almost 8% this month.
Hibernia said it will let out a floor of its Two Dockland Central in Dublin to a technology firm for €52.50 per sq ft.
Owen Callan, a senior analyst at Investec Ireland, said sterling was sold off again yesterday as investors mulled the “unanswered questions” about the nature of the hard Brexit deal May’s government said it will strike with the EU.
So far, UK economic data have helped stem the slide in sterling though any signs of the British economy weakening could raise questions about the currency, Callan said.
A notable feature of the Brexit markets has been the steady performance of European sovereign bond debt markets.
Buying by the ECB has helped dampen yields in the eurozone and Irish bonds have been helped too by economic growth.
Yesterday, the yield on the 10-year Irish bond was trading little changed at 0.91%, while the 10-year UK gilt was at 1.32%.
The top risk to US growth would come if president-elect Donald Trump keeps his protectionist promises, according to a Reuters poll that showed economists have not joined in the market exuberance since the shock November vote.
For most of his campaign and after the election, Mr Trump vowed to make sweeping changes to US trade and immigration policy, threatened to impose steep tariffs on Chinese imports and proposed hefty tax cuts.
While financial markets have retreated in the past week and hopes of a sudden spurt in inflation have faded, US 10-year Treasury yields are still up more than 25% since election day, and stocks have hit record highs.
Still, more than two-thirds of the 70 respondents to the question in the Reuters survey taken over the past week said Mr Trump’s protectionist policies were the biggest threat to the world’s largest economy this year.
“There is no question that near the top of the list of downside risks is the potential for more follow-through on the anti-free trade rhetoric,” said Jim O’Sullivan of High Frequency Economics.
The strong dollar, which hit a 14-year high early this month and is up close to 6% since Mr Trump was elected, is an extra near-term risk.
More than 80% of respondents said “no” when asked if now was the right time for US aggressive tax cuts, with the US economy close to full employment.
