Last year saw Danish property returns almost triple to 18%, their highest level ever. Growth was boosted by very strong residential performance along with a significant fall in commercial property yields, reflecting robust demand from international investors.
The all property valuation yield fell by a full 60 basis points, spurring capital values to rise by 11.9%. In addition, strong economic growth helped to stabilize rental values, reversing last years modest decline.
All sectors shared in the decline in yields, resulting in performance strengthening across the board. Residential was the best performing sector in 2005 with total returns a staggering 38.1%. Offices were the best performing commercial sector benefiting from a relatively large fall in yields and strong capital growth. Retails continued to see steady rental growth of 2.9%. The main difference between the two sectors was the lower income return on retail at 5.8%.
In the all important office market, which accounts for 58% of the total capital value of property portfolios, returns surged to 12.4% in 2005, from 4.7% the previous year. Overall, office rental values climbed to 0.7% from - 2.4% in 2004.
Despite last years growth, property was not the best performing asset in Denmark in 2005. Total returns on equities were even more impressive at 51.2%, although property comfortably out-performed bonds with returns of 3.3%. Over a five-year period, property is the out-performer with the highest total returns of 10.5% per year, followed by equities at 9.6% and bonds at 5.6%.
Source: IPD
