Residential property has outperformed other sectors over the past decade, an analysis of seven European markets by Swedish adviser Catella and IPD shows.
Residential property has outperformed other sectors over the past decade, an analysis of seven European markets by Swedish adviser Catella and IPD shows.
Catella and IPD studied the state of the housing markets in Denmark, Finland, France, Germany, Sweden, the Netherlands and the UK. They found that property values in the UK, Sweden and Finland have risen by 20% since 2007.
Other markets, such as Denmark and the Netherlands, remain substantially below 2007 levels, indicating a potential for catch-up in capital values.
Taken together, the seven residential markets showed an annualised total return of 6.6% p.a. in the last 10 years. Across Europe residential property was the only sector to avoid negative overall performance over the period.
Income returns were relatively low at 4.1% p.a., but this was offset by strong capital growth of 2.4%.
‘The strong demand for residential property in recent years has been based on its outperformance together with a well-balanced risk-return profile compared to commercial sectors, such as office and retail, which form the major part of the portfolios of most institutional investors,’ said Thomas Beyerle, group head of research at Catella.
The study also analysed the risk in the markets in the medium term (5 years) and long term (15 years). In general it found that those markets that saw a slump followed by a recovery are more prone to risk in the long term than the likes of Germany, which experienced neither a sharp boom nor a corrective downturn.
‘The results show the importance of reviewing and analysing each market individually, given that they have reached different stages in terms of their current position and market trends,' Beyerle said. 'However, from the investor's view, entrance into these markets is attractive,’ he added.