Ireland leads for returns
IPD’s longest-running and largest index (in terms of property values) is its annual index for the UK, now established for 14 years. Nearly 14,000 properties worth £75bn (e118bn) provide coverage of more than 75% of the professional investment market. The market return for 1998, 11.8%, was down on 1997, but exceeded the five- and 10-year averages for UK property. Both market rents and yields have continued to move positively.
The most exciting returns over recent years have been from Ireland, IPD’s smallest index, reaching 38.2% in 1998, the culmination of three years of accelerating values. However, the quarterly frequency of the IPD Irish index has shown up a slowdown in the first half of 1999, as capital growth of just (!) 5.1% occurred in the second quarter. Though containing only 305 properties, the index covers 70% of the investment market by value, and provides historical analyses dating back to 1984.
IPD’s first excursion into measuring continental European performance was the Dutch index, the second most valuable after the UK. Some 30 separate investors have now contributed data on their portfolios since 1994. The market has gradually improved over the past four years with total return reaching 13% in 1998. The residential sector, which forms more than half the database by value, acted as the engine of growth from 1995–97, but in 1998 offices took over as the primary mover. The database contains nearly Dfl60bn (e73bn) of properties throughout the country.
Swedish investment property values rose by a substantial 7.5% in 1998, nearly twice the rate of growth in 1997. The office sector, dominated by Stockholm, was in the vanguard of returns, with an overall performance of 15.3% – offices form around two-thirds of the index, based on data from both ‘institutional’ investors and listed property companies.
In Germany, income contributed the totality of investment performance in 1998, as capital values remained static overall; however this was an improvement against the previous two years when values fell marginally. The dominant office market saw a slight rise in values to become the strongest sector in 1998, although over three years, retails have fared best. The database sample is growing, and covers the majority of open-ended funds and some insurance portfolios. All the main office cities are covered by the index, with Frankfurt and Berlin leading in terms of value weightings.
IPD’s newest index is that for France, where the overall return was the lowest at 5%, just below the German figure. Capital growth remained negative, but at –1.1% was less severe than in the previous years. Improvements in market conditions were particularly marked for the small retail sector, with capital growth of 10.3% and total return 18.9%. Residentials, in contrast, showed an overall fall in values of 3.9% while offices also declined marginally. The income return for offices at 6.7% was significantly above that for residentials. Paris and the Ile de France are overwhelmingly dominant in the market, accounting for more than 80% of asset value.
Databases are in preparation for Denmark and Belgium.