All property total returns in Portugal reached 12.0% for 2006, the highest since 2002, and significantly higher than the bond return of 0.2% and the inflation rate of 2.5%. However equities outperformed all property, with total returns of 29.9%.
As in previous years, the retail sector was the market leader, but in 2006 it performed particularly well, with a total return of 15.9%. This was largely due to investor interest in regional shopping centers. The industrial sector and mixed-use properties both produced higher returns compared to 2005, at 7.7% and 11.1% respectively. The office sector, on the other hand, continued to be the worst performing sector, producing a total return of just 5.7%.
Capital growth was the main driver of the increase in total returns in 2006. Again, this was particularly evident in the retail sector, which achieved capital growth of 8.9%. Overall in 2006, all property capital value growth increased by over 200 basis points compared to 2005. Income growth in the industrial sector increased from 6.7% in 2005 to 7.1% in 2006. However, retails and offices experienced a drop compared to 2005 with the exception of mixed use properties which remained the same at 6.7%.
Director of Imométrica António Gil Machado said: "The Portuguese real estate market has once again shown a steady growth. With returns consistently above 10%, property is seen as one of the best performing asset classes in Portugal."
Country manager for IPD's service in Portugal Luis Francisco said: "The results of the Imométrica/IPD Portugal index demonstrate the stability of the Portuguese investment market, which continues to deliver high level of return to investors in the short and long term. It also proves the attractiveness of shopping centers as an investment asset for large international investors, whereas more prudence is shown in the Lisbon office market."