THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK JANUARY 2013
WEB REPORT
Progress is slow
Total return will increase, but only slowly 2012
2013
2014
2012-2016
Total return %
5.2
5.4
5.7
5.8
Quarterly change
-0.1
-0.2
-0.3
-0.1
Annual change
-0.1
-0.5
new
new
Source: The Danish Property Federation.
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There is still confidence in an increase in total return up until 2016, but progress is proving slower than was previously expected. The expectation for total return in 2012 is 5.2 percent which is a decrease of 0.1 percentage point compared to both last quarter and a year ago. Even though there is a decrease in the expectations compared to last quarter, it does not mean that pessi mism is spreading as total return in 2013 is expected to increase to 5.4 percent which is the lowest level in the two years, where the participants have been asked about their expectations for 2013. If we look at the results as shown in the table, the weaker optimism is notable. Total return from 2012-2016 is at a modest 5.8 percent which is a little over 30 percent less than the 8.4 percent that properties have produced in average over the last ten years.
The average total return based on the replies is presented in the table. Quarterly and annual changes are in percentage points.
50 percent of the participants expect a total return of between 5.0 and 5.5 percent in 2012 20%
It is interesting to see how the participants’ expectations have converged over time. Today, 50 percent of the participants in the forecast believe that the total return will end between 5.0 and 5.5 percent. This is a span of half a percentage point compared to two years ago, where the span was more than three times as high, 1.75 percentage points. When the new figures for total return 2012 are published at the end of February, we will know whether these expectations are fulfilled.
18% 16% 14% 12% 10% 8% 6%
Market rent improves
4%
Compared to last quarter, especially the expectations for market rent have changed in a positive direction. The market rent for office has increased with 12.0 indicator points giving an expectation of market rent for office at 2.4 indicator points. 71 percent have indicated unchanged market rent for office looking one year ahead, 17 percent believe in market rental growth, while 12 percent believe in negative market rental
2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: IPD Denmark Annual Property Index and the Danish Property Federation.
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Total return for investment properties. 2000 to 2011 shows the total return of IPD Denmark Annual Property Index. 2012 to 2014 shows the average of the replies from the consensus forecast. 50 percent of the replies lie within the blue lines.
Growing expectations to market rent compared to last quarter (indicator values between -100 og 100) January 2013
Capital value Quarterly change
Annual change
January 2013
Occupied space Quarterly Annual change change
January 2013
Market rent Quarterly change
Annual change
Office
4.9
0.1
4.9
-1.2
-2.4
-9.6
2.4
12.0
8.4
Retail
7.3
6.1
14.3
-2.4
-6.0
3.5
-1.2
5.9
16.6
Industrial
-25.6
-0.6
-5.8
-26.8
-1.8
-9.0
-23.2
4.2
-5.3
Residential
24.4
0.6
12.8
12.2
-0.9
2.7
17.1
5.2
9.9
Source: The Danish Property Federation.
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The participants have answered: ‘very low’, ‘lower’, ‘unchanged’, ‘higher’, ‘much higher’. The answers are given a value in order to obtain an indicator between -100 and 100. An indicator of 100 is identical to that everybody has answered ‘much higher’, and -100 is identical to that everybody has answered ‘very low’. An indicator of 0 indicates unchanged expectations. For example an indicator of 24.2 is feasible by 24.2 percent of the participants answering ‘much higher’ and the remaining answering ‘unchanged’.
Published Udgivetby afthe Ejendomsforeningen Danish Property Federation Danmark.
THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK JANUARY 2013
growth. With regards to industrial a majority of 53 percent has indicated that they believe in negative market rent a year from now which is a little better than last quarter. The indicator value for industrial market rent is -23.2. Compared to last year, there is an increase of 16.6 indicator points for retail market rent. This gives an indicator value of -1.2 for retail. The majority, 59 percent, expect unchanged retail market rent. Occupied space has increased compared to last quarter. A bit more expects an increase in occupied space for office and retail, however, a lower occupied space is expected for residential.
Highest expectations for capital value in the regional centres
The participants expect capital growth for office and retail to be slightly positive in the coming year, while 55 percent believe capital growth for industrial to be negative.
According to the expectations, Copenhagen will still be the place in Denmark where the capital growth will be the strongest in 2012 compared to other areas of the country. Next come Aarhus and the Triangle Region, while confidence remains the lowest for the rest of the country.
Lower economic growth than expected in 2012 When there is a decline in expectations for the total return on investment properties in this quarterly consensus forecast, it may be related to the fact that the outlook for economic growth slowed in 2012. The Economic Council has had to scale down their expectations for the Gross Domestic Product for 2012 with 1.1 percentage points. At the same time, expectations for economic growth for 2013 and 2014 grew from 0.4 and 0.3 percentage points to 1.6 and 1.8 percent. It is still a relatively modest but positive economic development. Properties can provide reasonable returns in the years of recession, and interest rates are currently historically low. A dividend yield of about five percent is quite reasonable on properties. But there are also risk factors generally related to the lack of economic growth, and at worst this can cause temporary decline in property values until the next boom turns with increased activity in properties. The boom will come – the only question is when.
Source: The Danish Property Federation
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Copenhagen is still the most popular
WEB REPORT
The map shows which regions in Denmark that have the highest value growth compared to other regions. We have asked about Copenhagen, Aarhus, the Triangle Region in Jutland (Fredericia, Kolding, and Vejle), and all other regions as one region. From the replies, we have created an indicator. If the area is light green, at least 70 percent of the participants have agreed that this region is doing best compared to other regions.
41 market players participated in this forecast. 46 per cent of the participants are property owners, 24 percent commercial brokers, 15 percent are banks/ mortgage providers, and 15 percent are other players.
Please find below the names of some of the companies, which have contributed Aareal Bank, ATP Ejendomme, Bertélco Ejendomme A/S, BBN Consult, BRF Kredit, CB Richard Ellis, Cura Management, DADES, danbolig Erhverv Johnny Hallas, DNErhverv, DTZ, EDC Erhverv Poul Erik Bech, FIH Erhvervsbank, Jeudan, Karberghus, NCC Construction Danmark A/S, Nordea, Nordea Ejendomme, PFA Ejendomme, PKA, RICS Nordic, Sampension, Sadolin & Albæk, and Sinding Gruppen.
About the Consensus Forecast These results from January 2013 are based on data collected and released by the Danish Property Federation. The objective is to create a more transparent property market. The Consensus Forecast is published on a quarterly basis and is very dependant on the participating companies’ good will to report data every quarter. Without these companies the Consensus Forecasts would never have been possible.
Published Udgivetby afthe Ejendomsforeningen Danish Property Federation Danmark.