Retail dominates Portuguese property market rise in 2006

Total property returns in Portugal rose to 12% in 2006, the highest return since 2002, and way above bond returns of 0.2% and inflation of 2.5%. The rise in property returns was dominated by the retail sector, which saw returns rocket by 15.9% last year, driven by strong investor demand for regional shopping centres, according to property investment indices operator IPD Global.

The industrial and mixed-use sectors both beat 2005 returns, with 7.7% and 11.1% respectively. The office sector was the worst performer with returns of just 5.7%. Capital growth was again the main driver of total returns, as the retail sector saw growth of 8.9%.

Rental income growth in the industrial sector rose to 7.1% in 2006, from 6.7% in the previous year. The retail and office sector, however, saw rental income drop from 2005 levels while mixed-use property income was stable at 6.7%

Equities outperformed all property investments, with total returns in 2006 of 29.9%.