95% OF IRISH CEO’S ARE LESS OPTIMISTIC ABOUT IRELAND’S SHORT-TERM ECONOMIC PROSPECTS
According to the 11th annual survey of the Top 1,000 CEO’s in Ireland conducted by property consultants CB Richard Ellis, 95% of Irish chief executives say they are less optimistic about Irish economic prospects in the short to medium term than they were 12 months ago.
63.0% of survey respondents say they expect the Irish economy to contract by a rate of more than 2.0% in 2009, while 36.0% of respondents expect a contraction of between 0 to 2.0% next year. Only 1.0% of respondents to the survey expect economic growth between 0 and 1% next year.Commercial property in both Ireland and elsewhere is still more in favour with CEO’s than residential property, but this year only 4% of respondents indic
Considering recent actions by central banks worldwide, it is not surprising that 98% of respondents to the CB Richard Ellis survey believe that the European Central Bank (ECB) will cut interest rates, with a nearly 50/50 split between those who believe the cuts next year will be “significant” or “slight”. Only 2.0% of respondents believe that ECB rates will rise slightly next year. With regards to UK interest rates, again the vast majority of Irish managing directors (97%) believe that interest rates will be cut over the next year. 2.0% of respondents believe UK rates will be kept on hold next year and 1.0% believes they will rise slightly. Probably due to the fact that US interest rates are already at extremely low levels, 56.0% of respondents believe that US interest rates will fall only slightly in 2009, whereas 23.0% believe US rates will remain at current levels and 17.0% believe US rates will fall significantly.
When asked what factor had the most negative impact on the Irish economy in 2008, CB Richard Ellis say that it is not surprising that over half of respondents cited funding issues arising from the credit crunch (51.0%), with the slowdown in residential construction accounting for a further 37.0%. The remaining 12.0% of respondents cited rising energy prices, inflation, rising consumer debt and a loss of competitiveness as the most negative impact on economic activity in 2008. Interestingly, when the top 1,000 CEO’s in Ireland were asked to indicate factors that are likely to have the most negative impact on economic performance in 2009, the most significant issues were identified as funding issues arising from the credit crunch (65.0%), loss of competitiveness (20.0%), and rising consumer debt (11.0%).
Reflecting the flight to security by investors in the past year, 65.0% of respondents cited bank deposits as their number-one preferred investment choice. 55.0% of respondents chose equities as one of their top three investment vehicles, 45.0% chose commercial property in the UK/Europe, and 33.0% chose commercial property in Ireland. Other respondents identified government securities, research & development and US property as one of their top 3 preferred investments.
According to Guy Hollis, Managing Director of CB Richard Ellis, Ireland, “In light of the financial turmoil of the past few months it is not surprising that bank deposits have become the preferred investment vehicle for 65.0% of our survey respondents. This reflects over a four-fold increase from last year, when only 15.0% of Irish chief executives chose bank deposits. Also not so surprising is the fact that equities has declined – in percentage terms – by half in the past year, with only 19.4% of our respondents stating that it was still their preferred investment. The decline in the number of Irish CEO’s identifying residential property as their preferred investment continued this year. Indeed, only 2.0% of respondents stated a preference for residential property in either Ireland or in the UK and Europe.
ated that Irish commercial property was their number one investment vehicle.”
Patrick Koucheravy, Property Economist at CB Richard Ellis, Ireland, said, “These results correspond with the ‘flight to security’ that we’ve seen over the past year. While central banks and world governments are attempting to put a floor under the economic downturn, it’s obvious that confidence, even amongst top business people, has taken a severe knock this year, and investors are much more risk averse than last year at this time.”
According to this latest piece of research from CB Richard Ellis, only 13.0% of Irish CEO’s view Irish commercial property more favourably this year compared to last as opposed to 22.0% of respondents who view UK/Europe commercial property more favourably. The only investment vehicle about which the majority of survey respondents indicated they feel more favourably towards was bank deposits (86.0%) which is perhaps not surprising in the current climate.
With regards to the 3-year outlook for property values, 42.0% of the chief executives that responded to the CB Richard Ellis survey believe that residential property values will decrease significantly and another 37.0% believe that house prices will decrease slightly over the next 3 year period. Only 11.0% indicated a belief that residential property values will increase slightly over the next three years. On commercial property, the outlook was similar, with 36.0% of respondents indicating that they believe commercial property values will fall significantly over the next three years. 40.0% of respondents are however forecasting that commercial property values will fall only slightly in the period. 17.0% of CEO’s indicated that they believe commercial property values will increase slightly over the next 3 years. Dublin offices was chosen as the sector of the commercial property market that will perform best over the next three years by 46.0% of respondents, with Dublin retail premises and Dublin industrial property expected to perform best by 23.0% and 22.0% of respondents, respectively.
Bank liquidity was the most critical issue that should be addressed by the Government over the next three years according to a majority of the survey’s respondents (56.0%), although competitiveness and government finances were not far behind, having been indicated as the top priority for Government by 41.0% and 40.0% of respondents, respectively.
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