IPD today released its transaction linked indices for the main European markets, to identify better the volatility and inherent risk present in the European real estate.
Over the last few years, IPD has been developing these indices using a hybrid methodology of transaction information and valuation data.
IPD's Co-Founding Director Ian Cullen said: "Regulators, central banks and end investors have all centralized the estimation of major downside risks in their evaluation of real estate investment. IPD's new transaction linked indices are designed to document these risks in a prudential and comprehensive way which has not been possible in the past."
These new transaction linked indices (TLIs) are not proposed as alternatives to the conventional IPD valuation based indices (VBIs). The low liquidity of commercial real estate investment markets will always mean that for most market tracking and performance assessment purposes valuation based measures will remain essential.
VBIs remain a robust method of tracking performance and cyclical patterns in the mature investment markets worldwide.
However, the low liquidity of these markets also means that the added risk of trading heterogeneous and generally large assets can be understated without factoring valuation to sale price movements into the analysis. This is the primary and crucial supporting role that the new TLIs are designed to fulfill.
The new TLIs extend across the following European markets and regions:
- Southern Europe (Italy, Portugal and Spain)
- European Union
- Pan Europe