Pan-European real estate fund returns were at their highest level since 2007 in the second quarter of 2014, reaching 3.2 per cent for the quarter, according to the IPD Pan-Europe Quarterly Property Fund Index.
Quarterly performance continues to improve and has not been as strong since Q2 2007 with annualised returns now standing at 9.0 per cent, the highest since Q4 2007.
Mark Clacy-Jones, vice president at MSCI, says: “The strong fund level performance over recent quarters is being driven by resurgence in the underlying asset performance which has also hit a seven year high at 2.8 per cent for the quarter ending June 2014. Asset values have now increased in three of the last four quarters with just a marginal fall in values in Q1 2014.
“Whilst income return remained steady at 1.6 per cent and still comprises the majority of the return, capital value growth made a significant contribution and at 1.2 per cent for the quarter it was the first time values have risen by more than half a percentage point in a single quarter since Q2 2007.”
The UK led the positive Q2 performance at an asset level, returning 7.2 per cent for the quarter. The other large markets of France, Germany and the Netherlands all performed solidly but countered the high UK returns somewhat, returning between 1.7 per cent and 2.3 per cent.
Despite the strong performance the index marginally underperformed equities, which returned 3.4 per cent (MSCI Europe), real estate equities which returned 11.8 per cent, and bonds which returned 4.0 per cent (J.P. Morgan GBI 7-10yr) over the second quarter of 2014.
The IPD Pan-Europe Quarterly Property Fund Index is based on the full universe of core Pan-European open-ended funds that are appraised quarterly to IFRS with performance validated by IPD. At end Q2 2014 these funds owned 530 assets with a market value of USD16.4 billion.