After exceptionally strong returns in 2005, the European property market is showing signs of plateau...
After exceptionally strong returns in 2005, the European property market is showing signs of plateauing, according to Aberdeen Property Investors.
Jon Lekander, head of investment strategy at Aberdeen, said last year was an "exceptional time" in terms of property returns, with a strong contribution from positive yield shift.
However, he said yields were being driven down by strong investor demand and the decreasing cost of financing.
He added: "We predict that unleveraged European property returns in 2005 were 12.6%, which would equate to an increase of 220 basis points on 2004.
"Ireland, Denmark, Norway, Spain, France and the UK all reported total returns exceeding 15% for 2005, while Germany reported very low total returns, with its All Property index generating just 0.5% in 2005. We expect the average European property returns to decrease in future due to limited capital growth. It is also likely returns will be increasingly driven by income growth and amount to 9%."
Property returns to fall in 2006 to 9% from 12.6% last year
Strong investor demand and falling cost of financing driving returns down
Germany reports lowest returns of 0.5% in 2005
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