Pan-European real estate fund returns grew strongly again in Q1 2014, reaching 2% for the quarter (measured in euros), according to the latest results of the IPD Pan-European Quarterly Property Fund Index.
Pan-European real estate fund returns grew strongly again in Q1 2014, reaching 2% for the quarter (measured in euros), according to the latest results of the IPD Pan-European Quarterly Property Fund Index.
Quarterly performance stood between 1.5% and 2% for the third quarter in a row, confirming the recovery which started in the first quarter of 2013.
The 12-month euro-denominated performance reached 6.3% for the year to March 2014, up from 5.1% in December 2013. 12-month performance is now at its highest level since June 2011.
Strong fund-level performance was driven by the underlying assets. Asset-level performance, as shown by the return from the properties underlying the index, stood at 1.6% for the quarter ending March 2014, a healthy level but slightly down on the two previous quarters (2.2% to September 2013 and 1.9% to December 2013). It brought the 12-month performance to March 2014 to 6.6%.
The main component of growth remains income return. At 1.6% for the quarter to March 2014, it has been virtually unchanged since the end of 2009. Capital growth, on the other end, is showing signs of a slowdown. After returning to positive territory in the second part of last year (0.5% in Q3 2013 and 0.3% in Q4), capital growth stagnated in Q1 2014.
By country, quarterly asset-level performance was boosted by UK assets, which returned 3.8% for the quarter to March 2014, while French assets, which represent more than a quarter of the index by value, were the main drag on growth, returning just 1%.
The index outperformed equities, which returned 1.9% (MSCI Europe) in Q1 2014, but lagged bonds, which returned 4.7% (J.P. Morgan GBI 7-10yr) over the same period. European property equities also registered a relatively strong quarterly return at 4.5% (MSCI Europe).
The IPD Pan-European Quarterly Property Fund Index is based on the full universe of core pan-European open-ended funds that are appraised quarterly to IFRS standards with performance validated by IPD.