IPD: Spanish property performance slows

IPD said its Spanish Property Index showed a total return on All Property of 12.5% for 2007, lower than the 2006 return of 16.9%. However, property still outperformed the equity and bond markets in 2007, which returned 10.7% and 1.7% respectively. All Property income returns fell to 4.8% in 2007, compared to 5.1% in 2006 and were the lowest recorded returns in the history of the Index. Capital growth also fell away, from 11.3% in 2006 to 7.4% in 2007.

Despite a weaker performance in 2007, over a three-year period All Property still remained very attractive with a total return of 15.5% year-on-year. The Industrial sector was the top performer in 2007, with a total return of 15.7%. Income
return, which has been historically higher than other sectors, achieved 6.5%, while capital growth was still relatively strong, at 8.7%.Total returns on the Retail and Office sectors came in at 14.1% and 9.9% respectively.

In comparison to other IPD country indices, the Spanish results are towards the middle of the group. Norway posted the highest figures in Europe with a 18.3% total return in 2007, while France came second with 17.8%, followed by Sweden (14.9%), Portugal (12.4%), Finland (11.3%), the Netherlands (11.3%), Denmark (10.2%), Ireland (9.9%), and the UK (-3.4%).

'The world financial crisis and the uncertainty of the evolution of the Spanish economy have had a negative impact on the performance of the property investment market in Spain. After several years of constant growth reaching maximum historical values, the investment market is facing a readjustment in rental and market values, although it remains strong', said Elsa Galindo, manager of IPD Spain.

The total value of the properties covered by the IPD Spanish Databank is EUR 16.1 bn, representing approximately 50% of the total property assets held by financial institutions and property companies.