UK - 2003 has started off on a relatively quiet note for the property market.
The Pooled Property Fund Indices compiled by Investment Property Databank (IPD) for HSBC and the Association of Property Unit Trusts has just published its results for the quarter to March and shows a total return of 1.5%.
In contrast, the FTSE All-Share Index continued to show weakness recording a poor -7.2%. The performance of the All-Share Index has clearly been influenced by the uncertainties caused by the Iraq crisis.
Since the quarter end equities have recovered some of the lost ground with an improvement in investor sentiment following the apparently swift resolution of the Iraq war.
Over the year to March 2003 property returns, as illustrated by the median fund in the Pooled Property Fund Indices recorded 8.8%, maintaining a significant performance advantage over the FTSE All-Share Index at -29.8% but marginally behind the FTSE 5-15 Year Gilt Index at 14.2%.
Over the longer-term of three years, perhaps the best measure of performance, the property returns are 8.7% per annum, comfortably ahead of equities and marginally ahead of gilts and demonstrates the consistency of property returns.
Over the last 12 months the strongest performing sectors of the UK property market have been retail (especially retail warehouses) and industrial assets. Those funds with above average exposure to these sectors have, stock issues apart, benefited from a performance advantage.
Returns for 2003 for all the asset classes will clearly be influenced by events in the Middle East together with global and domestic economic issues.
However, with average gross yields from pooled property funds comfortably above 5% per annum, the defensive aspect of this income component may be very welcome in the months ahead.
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