German index posts record returns in 2011: IPD

The total return before tax and financing for all German properties reached a record level of 5.5% in 2011, according to the latest research from the Investment Property Databank.

The 5.5% return on the DIX German Property Index exceeded industry expectations, which had put the total return at 4.8% for the year. IPD has been measuring the annual performance of German institutional investors’ property portfolios since 1996. The analyses go back to 1989.

The highest sector-level total return was achieved by residential property (7.8 %) last year, followed by industrial and retail at 7 % and 6.1 % respectively. Office properties also saw improved performance at 4.3 % (2010: 3.1%), but the return remained significantly behind that of other German property sectors.

An income return of 5.3% was recorded for 2011, 0.2 percentage points higher than in the previous year. Meanwhile capital growth was positive at 0.2%, in contrast to the negative figure of -0.9 % recorded for 2010. This was the first positive capital growth seen for many years.

'With capital growth of 3.2% in 2011, residential properties achieved their highest return since IPD began collecting data on the direct property holdings of institutional investors. In contrast to the other sectors, residential property has now provided consistently positive capital appreciation over a period of six years,' said Daniel Piazolo, managing director of IPD in Germany.

He added: 'Combined with an income return of 4.5 % in 2011, residential property not only represents a popular choice for new investment, but has also proved to be a productive long-term holding within portfolios.'

The 2011 results of the German Index DIX are based on more than 4,300 properties with a combined capital value of EUR 50 bn.