UK and Germany drag Pan-European index lower: IPD

Total returns recorded by IPD's Pan-European Property Index showed a 'significant' fall in 2007, down to 5.9% from 12.4% in the preceding year. Capital values were impacted by negative growth in the UK and Germany, Europe's largest economies. Further, IPD said that, similarly to the 2006 year, currencies had a major impact on investor returns. The appreciation of the Euro against other regional currencies resulted in a total return in Euros of 2.6% in 2007, substantially lower than the returns enjoyed without currency effect, in sterling and in Japanese yen. US dollar investors fared best in 2007, earning an All Property total return of 13.7%.

Ian Cullen, director and head of Systems and Information Standards at IPD said, '2007 marked the first year in the history of the IPD Pan-European Index that that the two largest component markets - the UK and Germany - delivered the two weakest returns. This coincidence - for they arrived at these points from different directions - fully accounts for the lowest local currency (unhedged) result on record.'

In 2007, retail delivered the strongest returns in 10 of the 15 covered countries, again acting as the main driver for returns. It is important to note however, that in the UK where there was a major correction in the second-half of 2007, retail was the worst performers delivering a -6.1% total return.

Offices in Norway delivered the strongest domestic returns in local currencies and indeed contributed strongly to All Property Total Returns in a further five countries. The residential sector dragged down performance and was indeed the worst performer in six of the 10 markets in which IPD measures this type of property.

The Index is based on a EUR 612bn sample of properties measured by IPD (KTI in Finland).