IPD: UK residential on track to deliver 9.6% return in 2010 (UK)

Investment grade market let residential property delivered a solid 4.7% six-month total return to June, according to the inaugural IPD UK Biannual Residential Investment Indicator.

Residential vs. commercial property returns

Source: IPD UK Residential Annual Index, IPD UK Annual Index, IPD UK Residential Biannual Investment Indicator and the IPD UK Quarterly Property Index.

Assuming the same return over the second half of this year, this would deliver an annualized rate of return for 2010 of 9.6%. Over the two previous years, during which the worst of the property recession and recovery manifested, the annualized return was -3.3%, based on the IPD UK Annual Residential Index.

This is the first ever bi-annual Residential Indicator published by IPD, reflecting the need for greater transparency for residential property investors as this sector of the market continues to grow in popularity among institutional investors. The Index captures 4,713 properties, worth just under £1 bln., on its first outing.

The solid return demonstrates the pedigree of the residential sector in delivering robust returns in a rising market, in addition to insulated depreciation during falling markets. The six-month total return combines a 2.5% capital growth with 2.2% income return. See chart above.

"While the six-month returns underperform the broader commercial property market by almost five percentage points, the broader market fell much more substantially during the cycle and therefore benefited more from the subsequent rebound," says Mark Weedon, Head of UK Residential Services at IPD.

"Residential performance during the first six months of 2010 continues to reflect the solid returns and lack of volatility which investors have come to enjoy and expect."

Three weeks to go until IPD RealWorld Conference, the UK's premier property research-focused two-day seminar in Cambridge on September 22-23. Book your place now by contacting Becci Elson at becci.elson@ipd.com

Source: IPD

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