French property total returns exceeded 20% at the end of 2006 with a total return of
21.7%, the highest level since 1998. Over the 3-year and 5-year periods to 2006, total
returns were 15.6% per year and 12.7% per year respectively.
In 2006, French Property out-performed the French equity total return of 20.9% and the very weak bonds total return of -0.9%.
The strong results for all property returns in 2006 were driven by strong capital growth at 15.3%. This compared to 8.8% in 2005. Income return of 5.7% was down on the 6.1% in 2005. The solid capital growth in 2006 was a result of 3.1% rental value growth and gross initial yields falling from 6.2% to 5.7%.
The retail sector was for the sixth successive year the best-performing in 2006, with a total return of 23.7%. All sectors except mixed-use assets exceeded a 20% total return. Notably, there was a strong recovery in office total returns, up to 21.8% in 2006 from 12.9% in 2005, as rental values recovered from a fall of -0.9% in 2005 to growth of 3.6% in 2006.
Managing Director of IPD France, Christian de Kerangal, said, "With these record results, France holds second place out of the European countries that have already published their annual indices, behind Ireland (27.2%), but ahead of the UK (18.1%), Denmark (17.8%), Norway (17.6%), Sweden (16.2%), the Netherlands (12.5%) and Portugal (12.0%), which indicates a robust property investment market."
Deputy Managing Director IPD France, Stéphanie Galiègue, noted: "All sectors continue to experience a drop in yields as well as an increase in rents in 2006, particularly in the office sector (+3.6%) where there had been a fall in rents for 3 consecutive years."