Urbis Think Tank
Capital returns improve across all sectors in Dec quarter
The IPD Property indices released today showed that capital returns improved across all sectors in the December quarter, while income remained fairly stable.
Capital returns improved (rolling annual %)
- All Property 1.8% (up from 0.3% in Sep qtr)
- Retail 2.2% (up from 1.0%)
- Office 1.6% (up from -0.3%)
- Industrial -0.2% (up from -1.9%)
- Hotel 5.1% (up from 3.4%)
Total returns for all properties for the December quarter were 9.5%, far exceeding the A-REITs (-0.4%), ASX200 (1.6%), or CBA bonds (5.4%). Cap rates were fairly stable, rising from 7.4% to 7.5% across all classes.
After declining throughout the 90s and 00s, cap rates rose sharply as as result of the GFC to better reflect risk.
However, cap rates are now stabilising. For the past year, cap rates have been around the levels of the mid 2000s.
