UK real estate returned almost 11% in 2003 - IPD

UK - UK property returns remained strong during 2003 with overall performance figures of 10.9% for the year, more than a percentage point higher than 2002’s 9.7% returns, according to Investment Property Databank (IPD).

The performance placed real estate mid-way in terms of UK asset class returns, UK equities, which returned 20.9% in 2003 and gilts (1.8%). However, property remains the best performing asset in the UK over the last three, five and ten years.

Allowing for inflation, UK real estate has now delivered real total returns of at least six percent in nine of the last 10 years, an unprecedented run, according to IPD since it started recording property data in 1970.

IPD says the key to the stable property returns for 2003 was a continued favourable decline in yields. Fears that a recovery in equities would lead to an exodus of capital out of the property market proved to be unfounded and sustained investor demand pushed the all property equivalent yield down by 40 basis points during 2003 - boosting capital values by 5.1%.

For the second year running retail was the best performing UK property sector with total returns of 15.5%. Within the sector, retail warehouses recorded the strongest rental growth and the highest total returns of 16.4%.

Conversely, total returns on offices remained depressed at 3.2% in 2003, reflecting a 10% drop in rental values. Industrials held the middle ground in 2003, with total returns of 11.3%.

The IPD figures are based on the analysis of 10,800 properties, valued at £105 billion. The universe currently covers 237 separate UK portfolios – equivalent to three quarters of the direct UK property assets of institutions and quoted property companies.

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