Property continues to outperform

LONDON-Property returns are improving, according to Jones Lang LaSalle’s Property Index for the second quarter of 2002. Commercial property produced an average quarterly return of 4.0% and an annual returns of 10.2%, increasing from 7.8% in the previous quarter. By comparison the FTSE All Share index fell by 11.0% over the quarter.

JLL said the increase in total returns for UK property is entirely due to capital value growth, which more than tripled over the quarter to 2.2% as a result of hardening yields across all sectors. But net income growth slowed significantly over the quarter to 1.2%.

The hardening of yields over the quarter reflects strong competition in the investment market, with the return of institutional investors to the market and the continued presence of debt-driven private investors. “The weight of money in this fast moving market has been reflected in the index results,” said JLL director Duncan Preston.

At the same time, new research from Insignia Richard Ellis shows that property investments have now given better returns than shares over the past ten years. Property recorded annualised total returns of 10.7% on the IPD Monthly Index over the ten years to June 2002, compared to 10.0% on the FTSE All Share Index. The margin of out-performance is even more dramatic over the shorter time periods of five, three and one years. In the past twelve months property returns beat equities by a massive 23.3%.

Peter Damesick, Head of Research at Insignia Richard Ellis, said: 'PropertyÂ's recent outstripping of equities is well known but the long term performance record now also looks very impressive against equities. Not only has property produced better returns than equities over ten years, but the sector has done so with much lower volatility, and therefore risk, than the stock market.'


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