IPD today announced the results of the Property Council / IPD Australian Property Index for the 12 months to end June, 2008.
The total return to Australian ungeared direct property investments was 13.5%, a significant drop from the 17.3% return achieved over the same period to June 2007. The main driving factor was the fall in the capital growth rate - from 10% in June 2007 to 6.8% in 2008. Income return remained steady at 6.4% compared to 6.8% over the same period last year. Over the longer term however, the Australian property investment market still appears more resilient than many others, with a 5-year total return of 14.3%.
Moreover the total return from investment property still managed to outstrip returns from both Australian equities and bonds by comfortable margins. The ASX All Ordinaries Index returned -12.1%, whilst the CBA Bond Index earned investors 5.4% over the same period. All property returns exceed those from equities and bonds over a 1, 3 and 10 year period. Australian Offices were once again the top performer for the seventh consecutive quarter, with a total return to June 2008 of 17.5%. Australian Retail returns dropped to 9.5% for the year to June 2008 - the lowest annual return to the retail sector in over ten years.
John Garimort, IPD Managing Director in Australia said: "As with all real estate markets around the globe, the Australian market has been cooling its heals. Quarterly indicators show declining capital growth, driven by higher capitalization and discount rates. Some markets are bucking the trend though, with the dynamic duo Brisbane and Perth continuing to enjoy the fruits of the resources boom. It has been these two markets that account for the strength of the office sector."