Modest capital depreciation was recorded over 2008 in the Austrian real estate market, at -1.5%, according to the IPD Austrian Annual Property Index.
Although this is a relatively small drop, it still represents the steepest annual decline in the five-year history of the index, reversing the trend of the previous three years and following the 1.5% achieved in 2007. Income return last year climbed 10 basis points to 5.2%. This produced an annual total return for 2008 of 3.6%.
All four key property sectors contributed negative capital value movements to the all property average. The most resilient sectors over 2008 were Retail and Residential, which provided a capital return of -0.7% each, followed by Offices, with -2.2%, and Industrial, at -3.6%. All property initial yields remained flat by the end of last year, at 5.7%.
Income returns were robust in 2008. Retail, Offices and Residential sectors all increased annual returns by 10 basis points to 6.2%, 5.0% and 4.0%, respectively. Industrial income returns slipped by 30 basis points to 7.1%.
All property annualised total returns over three and five years were 5.7% and 5.4%. Austrian real estate significantly outperformed both equities which returned -66.6%, as measured by the MSCI Austria Index, and underperformed against bonds, which returned 9.6%, as measured by the Österreichische Kontrollbank AG, Government Index.
Nassos Manginas, Director of IPD Europe said: "Austria's property markets were noted for their modest capital return during the years when many other Continental markets were achieving double digit annual capital appreciation. It is not surprising,
therefore, that movements in capital values in the subsequent downturn have equally been minor relative to some other markets."