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Published by the CIPS Network of the National Association of REALTORS®
Second Quarter 2002
Euro: A View from Ireland
By Alan Cooke
One of the few areas where the euro has impacted is that of property finance. Irish mortgage interest rates were considerably lower in the lead-in period (during which the euro was the official currency, running in tandem with the Irish punt) than they would have been had Ireland not elected to join the euro. This consumer and inflationary benefit is likely to continue, as banks vie to provide the cheapest mortgages within a single financial market.
It is fair to point out that the low interest rates that applied in Ireland over the past three years did not accord with what standard fiscal policies would normally dictate in a buoyant economy with effective full employment and rapidly spiraling house prices.
It is probable that in terms of commercial investment in property, capital will flow in future to the location of optimum return, as the euro brings greater transparency to international investment comparisons. Undoubtedly, membership of the single currency zone is a major factor influencing the choice of location for non-European companies wishing to establish a European base.
Ireland has been the highest per-capita European recipient of such inward investment in recent years and this has contributed in no small way to the success story of the Irish economy - a story that remains successful in comparative terms as Ireland's growth rate is expected to be amongst the highest in the OECD (Organization for Economic Cooperation and Development www.oecd.org) countries in 2002 and 2003.
Local factors still affect local property markets, not alone on a national scale but even in comparing different cities within the same country. Major differences are likely to persist for the foreseeable future in leases, provision for reviews of rent, taxation models, landlord and tenant law, measurement, and valuation practice.
Greater harmony in all of these areas is required to produce a single commercial property market in the countries that have joined the euro.
On the residential front, different tax structures and inheritance laws continue to present limited impediments to cross-boarder investment, but there is evidence of an increase in such transactions.
It may take ten years for Euroland's property market to experience the full impact of the single currency. It can only do so if the European Commission and Parliament tackle the differences that remain in how different countries treat ownership, occupation, sale, leasing and inheritance of real estate." |
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