IPD: Global property returns slowed in 2007

Global property returns in local currency terms stood at 11.5% in 2007, down from a 14.7% peak return delivered globally in 2006, IPD said as it published its first ever global property index.

IPD said the fall in local currency total returns reflected a deceleration or continuing decline in all of the five largest contributing markets - the US, UK, Japan and France - with Germany alone improving on its 2006 result, despite a further fall in capital values. Given the depreciation of the US dollar and Pound sterling, IPD noted that higher returns were achieved when expressed in terms of these two currencies. At the same time, Yen and Euro returns were lower as these currencies appreciated throughout the year.

Within Europe, Norway, France, Sweden, Spain and Portugal beat the overall local currency return of 11.5%, posting total returns respectively of 18.3%, 17.8%, 14.9%, 12.9% and 12.4%. Germany posted a total return of 4.5% while the UK's total return was -3.4%. 'Most European markets now look to have passed their peak levels of return, with the UK showing a dramatic dive into property recession - and a negative overall performance even with the mitigating impact of income,' IPD said in a statement. Instead, the strongest national market returns were those of South Africa, which returned 27.7%, and the Pacific Rim countries: Korea, New Zealand, Australia, Canada and the US. This first global index documents the situation in the world’s 22 most mature real estate markets.

'The major real estate investment management houses now have all started to accepted global mandates, and so need transparency on a comprehensive and consistent basis stretched beyond national boundaries,' IPD co-founding director Ian Cullen said. 'This is the main purpose of IPD’s first Global Index, which is already documenting the complex and far from synchronised process of decline from the 2006 world market peak return.'