IPD has released its 2007 results for the Property Council / IPD New Zealand Property Index. The total return for the 12 months to December 2007 was 22.4%, which is slightly lower than the 24.1% total return at the end of 2006.
Over the 12 months of 2007, the 22.4% total return on property out performed both bonds and equities with returns of 3.8% and 4.8% respectively. Capital growth rose to 13.7% in 2007 from 8.5% in 2006, while income return fell from 8.5% in 2006 to 7.7% in 2007. Offices was the best performing sector with a total return of 26.2%, followed by Retail at 24.2% and Industrials at 15.5%.
The best of the major markets was the Wellington Office Sector which recorded 28.2%, a shade under its record high of 29%. Strong rental growth and the yield firming experienced during 2007 have been the drivers in this market, and indicate a stronger demand than supply ratio in a dynamic market, resulting in low vacancies.
John Garimort, IPD Director in Australia commented, "While the property sector has been generating strong returns for investors over the past 5 years, the market is not immune to the effects of recent economic news. The reduction in the availability of credit is a factor that will have an impact on the NZ market, and this is appropriate. We do not see it as having the potential to push the cresting wave into a downfall, crashing the sector into turmoil. Unlike previous property cycles, there remains strong tenant demand, projected supply of new space in each of the sectors is still a little way off, meaning that rental growth will remain a factor of the market for a little while yet."