For the first time since 2007 there has been capital growth in continental European non-listed real estate funds of 0.7% resulting in a total return of 1.4%, according to the latest INREV Quarterly Index results for the sector. Capital growth was negative in INREV's Annual Index in 2008 and 2009 as well as the first two quarters of 2010.
In local currencies, the overall Index returned 1.7% in the third quarter of 2010. This compares to a quarterly performance of 1.8% for quarter two and 2.4% for quarter one. This slow down in growth of the total Index is a reflection of the UK market. The UK showed strong returns at the beginning of this year, 6.3% in Q1 but has slowed down since than to 3.6% in Q2 and now down to 2.2% while continental Europe picked up. Continental Europe returned 1.4% in quarter three from lower returns of 0.7% and 0.2% for quarter two and one respectively.
Multi-country funds have also seen a similar improvement, strengthening from 0.9% in Q2 to 1.6% in Q3.
"The continued improvement of the continental European non-listed fund market is a substantial indicator that capital growth and confidence is flowing back into Europe's non-listed real estate funds," said Casper Hesp, Senior Research Manager at INREV. "It is also interesting to note that there is a trend towards convergence where the difference in returns between the UK and continental Europe decreases."
The INREV Index also shows that as the industry continues to post relatively stable positive numbers, value-added funds continue to outperform core funds with returns of 2.2% and 1.5% respectively.
The results of the third quarter are based on a sample of 208 funds, the vast majority of which already contribute to the established annual INREV Index. The next update of the INREV Quarterly Index will be published in the last week of March in line with the publication of the INREV Annual Index release.