Global property performance
categories: Americas, EMEAI, Asia Pacific, Australia, Research Paper, Real Estate, REID Bryan, Real Estate Products & Services
Trends and Insights from MSCI’s 2016 IPD® Global Annual Property Index.
Global property held directly by private investors delivered a total return of 7.4% in 2016, marking the seventh consecutive year of positive performance since the global financial crisis (GFC). However, global momentum was negative, the return coming down from 10.7% in 2015.
While still positive, global capital growth more than halved in 2016 to 2.5% from 5.4% the previous year, potentially indicating that a turning point may have been reached. Despite the slower capital growth, yields in many markets continued to tighten and the income return on the Global Annual Property Index fell below 5% in 2016 for the first time since its inception.
Sweden was the best performing market in 2016, with a total return of 13.9%. After Sweden, the next best performers were Spain (13.3%) and Ireland (12.4%). The worst performer in 2016 was the U.K., where the Brexit shock had a negative impact on capital values and contributed to a total return of just 3.9% for the year.
The structural dynamics of real estate have attracted a wave of capital in this cycle, which has propelled the asset class through a period of strong performance. The appeal of the asset class was initially cyclical, as depressed prices attracted capital in the immediate aftermath of the GFC. In a typical cycle, tightening real estate yields would have slowed the flow of capital, but in recent years, record-low bond yields and financing costs have kept spreads attractive.