IBERIA - The Portuguese real estate market was one of the most resilient markets last year, according to new indices for the market calculated by IPD. The total return from all property classes rose 13.5%, marginally down on the 14% of 2001, according to the IPD Portugal Indices.

The IPD Spanish Indices showed an overall rise of 8.3% last year, down from nine percent the previous year, making property the second best performing asset after bonds. This contrasts with Portugal where property was the best performer, not only last year but for each of the past three years.

Over a three year time frame, property in Portugal produced annualised returns of 12.8% a year compared with 7.7% for bonds and –21.4% for equities. For Spain, bonds had a total return of 10.1% last year, while equities in 2002 showed a dismal –28.1% performance.

For the Portuguese market, income returns amounted to 7.5% of the 13.5%, with capital growth making up the balance of 5.9% ; while in Spain both the income returns at 5.9% and capital growth at 2.4% reflected the more muted market conditions.

The breakdown of the total return figures for Portugal show retail property providing a 17.8% return, office 7%, industrial 10.1% and residential 11.7%. In the Spanish market, retail was also strong at 10.8%, with office and industrial categories each returning 5.7%, and residential 15.4%.

IPD says that in Portugal retail sector property saw accelerating capital growth, strong rent rises and falling yields, while in Spain, the same sector benefited from a increase in capital values and a relatively high income return, reflecting the higher level of initial yields and low vacancy rates.

Both markets were hit by lower total returns in the office market. Commenting on this, Mark Callender, research director of IPD in London, says the deterioration in Spain has centred on the capital, whereas the central business district of Lisbon has been the most resilient part of the office market.