Five years of UK capital growth eroded in 18 months, says IPD

All Property UK commercial property capital values fell by a record -14.4% over the fourth quarter last year, giving an annual decline of -26.4%, according to the IPD UK Quarterly Property Index Q4 2008. Total returns fell by -13.0% over the final quarter and by -22.1% over the full year.

IPD said that in nominal terms the figures represent the biggest annual fall in capital values and lowest returns for UK commercial property investment on record. Capital values have now fallen -34.3% since the onset of the property market re-pricing cycle in July 2007. Fourth quarter and annual capital growth figures for the three principal sectors were -15.1% and -27.0% for Retail; -14.1% and -26.5% for Offices and; -13.7% and -25.7% for Industrials.

IPD said the story over the first seven years of the century is one of two parts. Over the five and a half years from 2002 to mid 2007, equivalent yields fell and capital values rose every quarter. In the 18 months to the end of 2008, equivalent yields have risen every quarter while capital values have fallen. Overall, the entire gains made over the boom cycle have been eroded in 18 months of successive falls, with capital values now broadly in line with December 2001 levels.