EUROPE - The European Association for Investors in Non-listed Real Estate Vehicles (INREV) has measured positive capital growth across the continental European property markets for the first time since 2007.
The organisation began reporting its market index both quarterly and annually 2010, and the latest INREV Quarterly Index shows that continental Europe saw a rise in capital values of 0.7% between July and September.
Capital growth was negative in INREV's Annual Index in 2008 and 2009 as well as the first two quarters of 2010.
The modest rise in capital values combined with income to produce a total return of 1.4% for the third quarter of 2010, up on the previous two quarters: 0.7% in Q2; 0.2% in Q1.
The UK continued to outperform the continent in terms of total returns, posting 2.2% during the third quarter, but this represents a steady decline on the previous two quarters: 3.6% in Q2; 6.3% in Q3.
The findings are roughly in line with Investment Property Databank's (IPD) quarterly UK index, which recorded 2.3% total return and 0.7% capital growth in Q3.
The INREV Quarterly Index for Europe including the UK recorded a total return 1.7% for the three-month period when calculated in local currencies.
This is down from a 1.8% return in Q2 and 2.4% in Q1, reflecting the slowdown in the UK market.
"The continued improvement of the continental European non-listed fund market is a substantial indicator that capital growth and confidence is flowing back into Europe's non-listed real estate funds," said Casper Hesp, senior research manager at INREV.
"It is also interesting to note that there is a trend towards convergence where the difference in returns between the UK and Continental Europe decreases."
The INREV Index also shows that as the industry continues to post relatively stable positive numbers, value-added funds continue to outperform core funds with returns of 2.2% and 1.5% respectively.
The results of the third quarter were based on a sample of 208 funds, the vast majority of which already contribute to the established annual INREV Index.
The next update of the INREV Quarterly Index will be published in the last week of March in line with the publication of the INREV Annual Index release.