New pan-European index
The combined performance of real estate investments across 11 European countries is measured by the new IPD Pan-European property index, launched by London-based Investment Property Databank.
The new index has been released for consultation purposes and after this period has been completed, the intention is to publish the index formally in June next year. “We want to make this product something that would be really useful for international investors and would welcome feed back on questions of content and method over the coming months,” says Ian Cullen, a founding director of IPD.
IPD says the index applies consistent market weighting and full currency conversion to the component national returns. “This provides investors with a clear profile of a broad and growing investment region.”
It is based on the IPD indices for Denmark, Norway, Sweden France Germany, Netherlands, Portugal, Spain, Ireland and the UK. In the case of Finland, the KTI Index has been restructured to conform to its computation procedures.
“We are reporting returns across 11 markets, covering the bulk of the Euro-zone for the first time, and extending the analysis both to the UK and to the Nordic region,” Cullen adds.
Over the past three years currency realignments have been significant in crossborder investor returns, says IPD. In local currency terms, returns across the 11 markets would have been relatively stable in the 6-7% range annually in this period.
But when aggregated, a US dollar investor would have received over 20% in each of the last two years due to dollar weakness. “An equivalent euro investor would have suffered a continuous fall in returns as the holding currency continued to strengthen.”
There are four stages in calculating the aggregate IPD Pan-European index returns: deriving monthly components of total return, re-weighting local currency index data according to size of local investment markets; converting re-weighted local currency data to a common currency and the calculating monthly and annual returns.