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Investing in property earns ten per cent a year

02 March 2004
Total investment returns on property reached an average of 10.9 per cent in 2003, up from 9.7 per cent the previous year, new data shows.

Figures from fund benchmarker Investor Property Databank reveal that, allowing for inflation, property has delivered real returns of at least six per cent in nine of the last ten years.

London shops led the way with returns of 16.83 per cent. Retail warehouses were next with 16.39 per cent returns in 2003. The top five performing property assets were all backed by retail property, including shopping centres and retail warehouses, boosting all retail returns to 15.5 per cent. Retail was the one sector to see a rise in rental values last year (3.7 percent).

"Fears that a recovery in equities would lead to a mass exodus of capital out of the property market proved to be unfounded and sustained investor demand pushed the all property equivalent yield down by 40 basis points during 2003, boosting capital values by 5.1 percent," IPD said in a statement.

Capital values continued to rise steadily, despite rental values slipping by 1.6 percent during 2003, the IPD data shows.

However, total returns on offices remained depressed at 3.2 percent in 2003, reflecting a -10 per cent drop in rental values. Office capital values fell on average by -4.1 percent.

UK industrial property occupied the middle ground in 2003, with total returns of 11.3 per cent.