Global real estate continues recovery

Real estate securities markets ranked as the strongest performers among equity asset classes in 2012.

Property stocks showed returns of over 20% in most major markets, compared to an overal return of the MSCI World Index of over 15% for the year as a whole.

The performance of the direct real estate market showed a slowing of momentum but, due to the relatively high income return, still reported a positive performance of 7.4% last year.

Although slowing during 2012, this is the third year of relatively strong performance across the major global real estate markets since the downturn of 2008/9.

'Unlike other crises, such as Japan in the early 1990’s, investors have not turned their backs on real estate but have instead sought to gain greater access to the asset classes,' said Peter Hobbs, IPD senior director.

Real estate remains the favoured alternative asset class, due to its strong relative performance, high income yield, and substantial diversification benefits for multi-asset portfolios, he added.

There are significant variations across markets, with Canada, South Africa and the US continuing to lead performance, with double digit returns for the year as a whole. At the other extreme, 15 markets experienced value declines during 2012, all of which, with the exception of Japan, were in Europe.

The most significant value declines were in Spain (-7.4%) and Hungary (-7.2%), with the relatively strong income returns in the other markets meaning that total returns remained positive for the year as a whole.