IPD has announced the results of the Property Council / IPD Australian Property Index for the 12 months to March 31st, 2008. The total return for Australian ungeared direct property investments was 18.1% up from 17.0% in the same period to March 31st, 2007.
The total return from investment property far outstripping returns from both Australian equities and bonds. The ASX All Ordinaries Index returned -6.0%, whilst the CBA Bond Index earned investors 4.2% over the same period. All property returns exceed those from equities and bonds over a 1, 3 and 10 year period.
Australian Offices were the top performer returning 22.7%. Retail earned investors 14% in the 12- month period, whilst Industrial properties returned 13.8%.
"The returns posted by Australian Offices were well above the 5-year average of 13.5%," Client Services Manager Max Arkey said. "Generally cap rates have continued to firm across Retail, Industrial and Composite sectors, but not to the same extent that was experienced during the previous three quarters. Office cap rates have remained steady from December to March and even began to tick upwards slightly in some capital cities."
These direct property returns are in stark contrast to the -24.2% return recorded for the S&P/ASX LPT300 series in the 12-months to March. Concerns over financial structures employed by some of the LPTs, coupled with turmoil in global financial markets have highlighted the disconnect between direct property returns and the share price of many of their listed owners.
The capital growth component of returns is influenced by the proportion of assets valued. Approximately 28% of the sample was revalued this quarter, consistent with the proportion of the sample valued in past March and September quarters.
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