This article is from the Australian Property Journal archive
COMMERCIAL property returns across the world has slow in 2007, but in Australia the strength of the office sector has underpinned growth, according IPD.
According to IPD’s inaugural Global Property Index, the global total return for the 12 months to December 31 2007 was at 11.5%. This was significantly down on the 14.7% peak return in 2006.
The fall in local currency total returns reflected deceleration or continuing decline in all of the five largest contributing markets; the United States, United Kingdom, Japan and France.
According to the index, most European markets now look to have passed their peak levels of return, with the UK showing a dramatic dive into property recession — and a negative overall performance, even with the mitigating impact of income.
Of the large markets, Germany was the only country to improve on its 2006 result, despite a further fall in capital values.
Higher returns were achieved when expressed in terms of £ Sterling or $US, since these currencies deteriorated in value through the year. Conversely, Yen and Euro returns were lower as these currencies appreciated through the year.
The three years to end-2007 witnessed a boom in property returns across the globe, as the weight of investment capital has pushed up values, though the precise peaks for international investors have depended on the currencies in which they have been working. But for all denominations except $US, the last three years’ total return has out-performed the 5-year and 7-year averages.
In 2007, the strongest returns were from South Africa, which returned 27.7%, and the Pacific Rim countries in Korea, New Zealand, Australia finally followed by Canada and the US.
IPD’s research manager Jess Moyer said the Australian market performed well within an international context, being in the top five countries in terms of local currency returns.
“This was driven predominantly by the strength in the local office market. While the Australian direct property returns have been rising year on year on December 2007, it now remains to be seen if we will follow the lead of the major international markets,” he added.
According to the index, retails were the weakest sector in the 2007 IPD Global Index returning 8.6%, and reflected faltering consumer confidence in the US and UK, where it was the weakest form of commercial property.
However by contrast retail was the strongest sector in many mainland European markets, with the strength and stability of the Euro currency supporting the sector.
The index shows offices represented the strongest of the four global property sectors with a total return of 14.2% – as global business service growth remained buoyant through most of the year.
Australia, the US, France and Canada stood out amongst major index contributors with impressive office growth.
However, it must be noted that the credit crunch had only just started to impact on real estate values by December 2007, and this effect was as yet largely confined to the UK.
Australian Property Journal
