Twenty twelve wasn't a bad year for international real estate, not as bad as we have seen in recent years anyway, and especially for equities. The MSCI World Index posted a local currency return of 15% and real estate securities came in at 20% across most major markets and indices. Even direct real estate is still going strong, the IPD Global and Pan-European Annual Property Indices show a slowing of momentum but, due to the relatively high income return, still positive performance of 7.4% for the year as a whole.
On a general basis global real estate can be said to have experienced a slowdown last year, but was still the third year of relatively strong performance across the major global real estate markets since the downturn of 2008/9.
Peter Hobbs, IPD Senior Director, said, "Unlike other crises, such as Japan in the early 1990's, investors have not turned their backs on real estate but have instead sought to gain greater access to the asset classes. Real estate remains the favoured alternative asset class, due to its strong relative performance, high income yield, and substantial diversification benefits for multi-asset portfolios."
Pierre Cherki, Head of Alternatives and Real Assets, Deutsche Asset and Wealth Management confirmed this trend by saying, "We are seeing continued, sustained, interest in cross-border real estate investing with experienced global investors in Germany, the US and Canada, being joined by a wave of new investors from Asia, the Middle East and Europe, seeking exposure to real estate across global markets."
As expected the overall trend masks massive differences between markets and regions, with double digit returns in the likes of Canada, South Africa and the US continuing to lead performance, and many European nations plus the likes of Japan holding the other end of the table. Indeed fifteen markets experienced value declines during 2012, all of which, with the exception of Japan, were in Europe. The most significant value declines were in Spain (-7.4%) and Hungary (-7.2%), with the relatively strong income returns in the other markets meaning that total returns remained positive for the year as a whole.