Major lending institutions this week blamed the 3 per cent hike in stamp duty in last year's Budget for the squeeze on lending profits to the commercial property sector.
The slump in activity in the market combined with the flight of investor cash into countries such as the UK and Germany, where transaction costs are lower and yields are higher, means Irish banks are chasing fewer deals at a more competitive rate.
Figures recently published by CB Richard Ellis Gunne underline the scale of the exodus. By the end of this year, the property group forecasts that Irish investors will plough close to €2 billion into the UK market compared to a predicted €750 million in Irish property.
And while banks such as AIB, Bank of Ireland and Anglo Irish bank, which all have substantial UK operations, claim to be benefiting from the surge in demand for overseas property, a sharp drop in investor activity at home inevitably raises concerns over future capital values.
AIB's head of property and construction, Donal Halpin, claimed the Minister for Finance, Mr McCreevy, would be "pressurised" into reassessing the 9 per cent stamp rate in this year's budget, once "he looked at the amount of money that has flooded out of the country this year".
He said: "We've spent an awful lot more this year funding acquisitions in the UK because the entrance costs there are 4 per cent cheaper than they are here.
"We're losing money from this country to other markets and that's disappointing when there are enough opportunities here to attract strong investment."
In the short-term, tougher competitive conditions on the bank should play into the hands of bargain-hunting investors and it's clear that many institutions are being forced into conceding loan rates they wouldn't have contemplated a couple of years ago, when the commercial property boom was at its height.
The institutions insist credit terms remain stringent with covenant structure, lease-terms and visible cash flow determining the lending price, but, as most of the banks claim they deal primarily with existing customers, these factors are usually well documented and the borrower normally has more room for negotiation.
Commercial property loans differ from residential mortgages in that rates are usually quoted wholesale and the margin - the cost of borrowing the bank charges to the customer above the base rate - is set according to market conditions and is flexible depending on the credentials of the borrower.
Anglo Irish is one of the most expensive in the market with margins fluctuating between 2 and 2.25 per cent while Bank of Ireland said it offered margins under 1.5 per cent.
Although the banks declined to comment on how far margins have moved on average this year, Bank of Scotland's head of property, Paul Cunningham, said the "decrease was in line with the 3 per cent increase in stamp duty".
Mr Halpin admitted that "margins are under pressure" but stressed this was also part of a wider banking trend due to the increases in money market swap rates.
However another manager with one of the country's largest lending institutions commented privately that there was "growing concern in the banking community at the lack of buyers in the market" and claimed high transaction costs and the excess supply in the office sector were the main factors forcing investors overseas.
The CB Richard Ellis Gunne third quarter 2003 Irish investor market bulletin shows over 50 per cent of the money spent in the Irish market this year has been in the office sector. And yet rental incomes in some suburban developments have reportedly plummeted 20 per cent. So is there a growing risk to the banks of loan defaults?
Mr Halpin said: "If we had this strong vacancy level in the office sector in a high interest rate environment then, yes, there would be a concern over how investors could afford to finance their loans.
But these days there are a limited number of landlords involved in one property.
The investor usually owns or is part of a diversified portfolio which generates a constant cashflow."
