IPD: US real estate market suffers sharpest six month decline (US)

US real estate market values have fallen by -17% over the first six months of 2009, according to the IPD US Quarterly Indicator. Compared to last year's IPD US Annual Property Index, which revealed an annual capital return of -12.2%, the first six months of 2009 has seen the pace of capital depreciation already far outstrip 2008's entire decline.

Year-to-date capital returns were jointly sharpest amongst Offices and Industrials, both fell by -18.2%, while Residential and Retail fell by -16.5% and -14.1%, respectively.

Over the second quarter, however, negative capital return eased, at -6.9%, compared to the Q1's -10.8% level. Within the sectors, negative quarterly capital growth was sharpest in Offices, at -7.8%, closely followed by Industrials, at -7.5%, while Residential fell by -6.8% and Retail recorded the shallowest decline, at -5.1%.

Over the same three-month period, US all property income return has edged up 20 basis points to 1.6%, contributing to an overall quarterly total return of -5.4%.

Simon Fairchild, Managing Director at IPD US, said: "Negative capital return over the first six months of 2009 is now steeper in the US than it is the UK – at -17% compared to -12.4%. For global real estate investors this may come as a surprise, given that Britain was the most significant real estate market to suffer in 2008.

"But the outlook is not entirely gloomy. Pressure on market values – in both the US and the UK – appears to be easing, though not necessarily at an end. By comparison the Dutch real estate market, one of Europe's most transparent markets, recorded a capital return for the first half of the year of -5.4%. For such an historically stable real estate market, this fall is unprecedented."

(The IPD US Quarterly Indicator is based on 1,981 properties worth $84.4 billion from 16 funds at the end of June 2009. The databank is expected to expand substantially in coming years.)

Source: IPD

Related News