In 2006 the All Property total returns across European real estate markets in local currencies exceeded those in 2005, reaching 13.3%, up from 11.8%. Capital values continued to rise across Europe and grew by 7.8%. Income return in 2006 was slightly below that achieved in 2005, at 5.1%.
The results highlight the effect of exchange rate movements on investor returns. The strong depreciation of the dollar meant that total returns were significantly higher in this currency in 2006 compared to the previous year: -2.1% in 2005 jumped up to 27.6% in 2006. Similarly, total returns in Yen have outperformed significantly, achieving 28.8%. Elsewhere, those investing within the Eurozone have benefited from steadily rising returns and have experienced the best year since the start of the Index in 2001, with a total return at 10.1%. This was driven by the increase in capital growth, at 4.6%.
Ian Cullen, Director and Head of Systems and Information Standards at IPD said, "The local currency Pan-European total return of 13.3% in 2006 reflected the broadest spread of national market performances since the start of the Index in 2001, and the narrowest range of income returns as investor demand brought yield compression to the higher yielding markets".
The Index also reports returns to the three main property sectors (retail, office and residential), held in varying ratios across the 14 real estate markets covered. In 2006 retails again delivered the strongest returns in 10 countries, and so dominated the performance, as it has for the last five years. It is important to note, however, that returns to the Retail sector were lower in some countries compared to 2005, most crucially in the UK which dominates Pan-European retail sector performance. The Office sector in several key markets benefited from more rapid acceleration in performance than for retail assets, and as a result was the fastest growing Pan-European sector in 2006.
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