The IPD Belgium Annual Property Index, released yesterday, showed that all sectors of Belgian investment property delivered a total return of 3.6% in 2012, a decrease compared with 4.6% in 2011. Inflation (CPI) was 2.1%. These results show that the property investment market is not safe from the macro-economic environment in Belgium.
Although the index showed lower performance this year against other major asset classes, with equities delivering the highest return at 38.6%, followed by property equities at 12.6% and bonds at 20.9% (JP Morgan 7-10 years); over a 5-year period, direct property still outperformed both equities and property equities.
As in the last two years, for all sectors income return was stable at 5.8%, therefore the capital growth of -2.1% in 2012 was the cause of the declining total return. The cumulative capital growth was -8.1%, nominal over the last five years.
Between the three major sectors there is marked variation. The retail sector showed the highest total return with 5.8%, while industrial showed the lowest total return of 2.0%. Offices showed a total return of 2.8%. Both offices and industrial showed a capital growth of -2.9% for offices and -4.9% for industrial.
Arnoud Vlak, Managing Director of IPD BeNeLux, said, “Depreciation of investment property has not ended during 2012. The retail sector however showed positive but gradually decreasing capital growth over the last three years. Over the same period, offices showed depreciation of capital values.
“The vacancy rates in the office market, one of the important indicators for capital growth, grew significantly in that same timeframe due to the present economic downturn. Nonetheless in all sectors direct property proves to be a generator of an overall stable income return, thus showing direct property to be a resilient long term investment.”