Norwegian property markets post negative returns, says IPD (NO)

IPD yesterday (19 March 2009) published the IPD Norway Annual Property Index for 2008. According to the index, returns from investments in Norwegian commercial real estate fell to -4.7% last year, following three years of successive 15% plus returns.

Property significantly outperformed the equity market, which returned -54.1% according to the Oslo Benchmark (OSEBX) Index, but lagged behind the bonds markets, which returned 10.5%, as measured by the Oslo five year Stat Index (ST5X) Index. The total returns were also lower than neighboring Sweden, which returned -3.3% in 2008 and Denmark, which recorded 3.1%.

The most significant drag on performance over 2008 was the swing in Office capital values, which fell by 12.5%, reflecting similar falls seen in other European countries in what has consistently proved to be the most volatile sector in this global property re-pricing cycle. Capital value falls in Industrials were next, falling 7.4%, followed by Retail, which fell by 5.6%. The overall total return for Norwegian property was insulated by robust income return across all sectors, which produced an All Property return of 5.7%.

The capital value falls are reflected in the total returns for the three principal sectors with Offices, Industrials and Retail returning -7.4%, -1.7% and -0.3%, respectively. Over the longer-term annualised total returns still place property as the top performing asset class compared to equities and bonds. Over three years, property returned 9.8%, compared to equities, at -12.1%, and bonds, at 4.5%. Over five years property, equities and bonds returned 11.0%, 5.7% and 5.1%, respectively while over nine years – since the index's inception – returns were 10.3%, 1.9% and 6.6%, respectively.

Håvard Bjorå, Norway Country Manager IPD Norden said: "Yields have now - after five years of compression - started to rise across all property sectors in Norway. The yield shift alone would have cut the values by 15%, but this was partially counterbalanced by a robust rental growth in the retail sector. The capital values dropped by 9.9% in Norway 2008, which was a bit more than in the other Nordic countries, but much milder than those experienced in the UK and Ireland."

Source: IPD

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