The IPD Sweden Quarterly Listed Property Market Monitor shows that underlying property returns in the listed sector continue to be stable.
The total return from the underlying property assets reached 1.6% in the third quarter, which is marginally below last year's third quarter of 1.9%. Over the past twelve months to September, total returns reached 8.1% with 5.5% income return and 2.5% capital growth, which compares with a total return of 8.8% for the full year 2011.
Since the introduction of International Financial Reporting Standards (IFRS) in 2005, the underlying properties of listed companies have generated an annual average total return of 9.4%. Return variation has been between 0.7% and 16.3%, as measured over the rolling twelve months. The income return has varied from 5.4% to 6.4%, while capital growth demonstrated significantly higher volatility with an annual average of 3.5%. Given that the rate of inflation over the same period has been very low, property assets have not only generated an attractive total return, but also a real capital growth of almost 2% per year.
Capital growth in the third quarter has slowed, reaching a net SEK 0.5 billion (approx. €0.05 billion). This represents an increase in value of 0.2%. The spread between the companies varies from around -1% to +1% in Q3 alone.
Erik Nyman, IPD Business Development, Norden says, "So far the sector has fared better than in many international markets. Now domestic economic signals have clearly weakened in the autumn, not least the labour market. The sharp increase in the number of redundancies is an example, and it would be surprising if these signals were not gradually reflected in property returns."
The IPD Sweden Quarterly Listed Property Market Monitor is based on public information from 14 listed property companies on NASDAQ OMX Stockholm. They all conduct quarterly property valuations and hold more than 3,300 properties (end third quarter) valued at SEK 255 billion (approx. €29.6 billion), or almost 25% of the total Swedish commercial investor market. The sector held SEK 120 billion (approx. €13.9 billion) of property assets at the start of 2005 and has since doubled in size. Eleven of the fourteen companies have been listed since the introduction of IFRS.
Companies included in our survey today are Atrium Ljungberg, Balder, Castellum, Corem, Diös, Fabege, FastPartner, Heba, Hufvudstaden, Klövern, Kungsleden, Sagax, Wallenstam and Wihlborgs. Historically delisted property companies are also included.
The Market Monitor aims at further increasing transparency in the Swedish property market with regards to returns, providing asset managers, investors and others a performance measurement that can be compared to other assets such as bonds, equities and property equities. Note however that returns disclosed in the Market Monitor do not follow the same strict rules as IPD indices. Although IPD standard calculation methods have been applied, data input does not meet our index rules, especially since data is not available on an asset level. Returns also include the impact from acquisitions, disposals, developments, land, etc.