Danish property delivers 3.5% in 2013: IPD

Danish property delivered a total return of 3.5% in 2013, according to the IPD Denmark Annual Property Index.

The figure represents a decrease of 0.4% compared with 2012, and is 4.6% lower than the full 14-year historical annualised total return of 8.1% per annum. However, due to a stable income return of 4.8%, total return remained positive.

'The total return for 2013 is disappointing for Danish property,' commented John Frederiksen, president of the Danish Property Federation. 'The market expected a higher total return compared to 2012, but the total return for 2013 was 1.5% lower than predicted in The Danish Property Federation Consensus Forecast.'

The main reason for this is the unexpected decrease in commercial property values during 2013, he added.

Compared to the public asset classes, commercial property significantly outperformed bonds at minus 6.4%, but underperformed equities at 20.5% in 2013.

Denmark is the eighth country for which IPD has reported 2013 returns. The other seven are the UK, US, Canada, The Netherlands, Sweden, Ireland and Australia. Early indications suggest that Continental European countries have underperformed both the UK and non-European regions, and Denmark is no exception.

Danish capital values continued to fall at an increased but still modest rate of -1.2%, against -0.9% in 2012. Income return stayed unchanged from 2012 at 4.8%, low both in a historical and European context. This is in part due to gradually increasing vacancy rates, which have risen from below 4% to more than 10% since the start of the global financial crisis.

Values fell across all major sectors in 2013 with the exception of residential, where they increased by a modest 0.1%. The largest fall in values was recorded by industrial, at -3.3%. These movements reflect changing vacancy rates, which fell from 5.1% to 4.1% for residential, while increasing from 7.4% to 11.3% for industrial.