The Danish Property Federation´s market statistics - consensus forecast (July 2013)

THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK JULY 2013

WEB REPORT

Expectations for 2013 hit the lowest level

The expectations for 2014 and 2015 have also decreased. The average annual expectation for the coming five years from 2013 to 2017 is 5.5 percent in total return. It is not only a decrease of 0.3 percentage points compared to last quarter – it is also the lowest expectations ever covering a five year period. Thus a much slower coming cyclical upturn is expected.

At the same time as the expectations hit the lowest level, there is an increasing consensus on the coming expectations. If you ignore the 25 percent lowest and the 25 percent highest expectations for total return in the coming years, the remaining 50 percent has expectations of a return of between 4.8 and 5.5 percent – a spread of 0.8 percentage points, when rounded of – which is shown with blue in the figure to the right. There is a historical small spread between the expectations for 2013, as the spread originally was 2.0 percentage points.

The total return is expected to increase to 5.6 percent in 2015 2013

2014

2015

2013-2017

5,0

5,3

Quarterly change

-0,4

-0,3

-0,3

-0,3

Annual change

-0,7

-0,7

New

New

Total return

5,6

5,5

Source: The Danish Property Federation.

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The expectations for investment properties have decreased. Third quarter was positive in both 2011 and 2012, but the trend does not continue as third quarter 2013 expects a total return of 5.0 percent on investment properties. This is a decrease of 0.4 percentage points compared to last quarter and of 0.7 percentage points compared to last year. This is the 10th time that the participants in the forecast have been asked about their expectations for 2013, however, this time the expectations are the lowest.

The average total return based on the replies is presented in the table.

A majority expects an increase compared to the total return of 3.8 in 2012 20 % 18 % 16 % 14 % 12 % 10 % 8% 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Expectations for residential are constantly increasing

Source: IPD Denmark Annual Property Index and the Danish Property Federation.

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For almost two years, the expectations for residential have increased. Expectations for capital value are the most positive, which is shown in the table below. The

Total return for investment properties. 2000 to 2012 shows the total return of IPD Denmark Annual Property Index. 2013 to 2015 shows the average of the replies from the consensus forecast. 50 percent of the replies lie within the blue lines.

Positive development for occupied space (indicator values between -100 og 100)

jul-13 Office

Capital value Quarterly change

1,3

-8,1

Annual change

jul-13

Occupied space Quarterly Annual change change

-2,2

8,8

2,9

6,5

jul-13

Market rent Quarterly change

Annual change

-7,5

-11,0

-6,4

7,5

-3,0

5,2

10,0

0,7

8,9

-5,0

-15,5

1,8

Industry

-15,0

7,1

10,0

-8,8

4,0

8,3

-20,0

2,1

3,9

Residential

32,5

1,1

13,2

16,3

1,1

6,0

23,8

5,1

6,7

Retail

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 everyone having answered ‘much higher’, and -100 is identical to everyone having answered ‘very low’. An indicator of 0 indicates unchanged expectations. For example an indicator of 32.5 is feasible by 32.5 percent of the participants answering ‘much higher’ and the remaining answers are ‘unchanged’.

Published Udgivetby afthe Ejendomsforeningen Danish Property Federation Danmark.

THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK JULY 2013

indicator value of 32.5 is the highest measured on residential capital value and it is the second highest indicator value ever measured on all sectors within capital value, occupied space, and market rent. Two thirds of the participants expect increased capital value on residential with prime location in a year compared with today.

Both office, retail, industry, and residential experience smaller increases in expectations for the occupied space. The expectations to the occupied space is at its highest on all four sectors since third quarter 2011.Conversely, there is a decrease in the expectation for market rent on office and retail. 21 percent of the participants believe that the market rent on office with prime location will decrease a year from now.

There is a broad consensus that the capital value for the rest of the country will develop slower than in Copenhagen, Aarhus, and the Triangle Region in Jutland in all of 2013. It seems that they expect a growth in capital value in the larger cities probably followed by the rest of the country.

Also lower economic growth in 2013 Unfortunately, we see a trend that the expectations of growth for the Danish economy have to be downgraded. This also applies for the economic advisers, who, in May, downgraded the growth expectations for 2013 from 1.6 percent to only 0.2 percent. Compared to the period from 1997 to 2007, where the Danish economy experienced an average economic growth of 1.9 percent, the present economic situation is not satisfactory. In general, it has been expected that the economy would quickly move towards a boom after the economic crisis, but from 2010 to 2012 the economic growth rates have only been 1.6, 1.1, and -0.5 percent.

When the property industry downgrade the expectations to the investment property market over the coming years compared to last quarter, it is linked to the low economic growth. If the economic advisers’ forecast with growth rates of 1.8 and 1.9 percent for 2014 and 2015 hopefully fulfils, it will mean higher activity on the property market again.

Still no trust in capital value for the rest of Denmark

Source: The Danish Property Federation.

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Relatively low growth in capital value for the rest of the country

WEB REPORT

The map shows which regions in Denmark that have the highest value growth compared to other regions. We have asked about the Triangle Region in Jutland (Fredericia, Kolding, and Vejle), Copenhagen, Aarhus 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.

40 market players participated in this forecast. 40 percent of the participants are property owners. Furthermore, 33 percent are commercial brokers, 10 percent are banks/mortgage providers, and 18 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, Carlsberg Byen, CB Richard Ellis, Chr. Hjorth Erhvervsejendomme, Cura Management, DADES, Danbolig erhverv Johnny Hallas, DN-Erhverv, DTZ, EDC Erhverv Poul Erik Bech, FIH Erhvervsbank, Jeudan, Karberghus, Københavns Lufthavne, Lund & Lindhardt, NCC Construction Danmark A/S, Nordea, Nordea Ejendomme, PFA Ejendomme, PKA, Reinholdt A/S, RICS Nordic, Sadolin & Albæk, Sampension, Saxo Properties, Sinding Gruppen.

About the Consensus Forecast These results from July 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.