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THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK OCTOBER 2012

WEB REPORT

Stagnation

The predicted stagnation might have something to do with the outlook for economic activity, which is still relatively low. On the other hand, there is no sign of recession in the near future. 50 percent of the participants in the consensus forecast expect that the total return will be between 5.0 and 5.8 percent in 2012, which is an increase compared to 2011, where the total return was 4.7 percent. 12 percent of the participants expect total return in 2012 to be lower than in 2011.

Unchanged expectations compared to last quarter 2012

2013

2014

2012-2016

Total return %

5,4

5,6

6,0

5,9

Quarterly change

0,0

0,0

0,0

-0,1

Annual change

-0,4

-0,6

new

new

Source: The Danish Property Federation.

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The last consensus forecast for this year predicts stagnation in total return. The participants expect a total return in 2012 of 5.4 percent. This is a change of 0.0 percentage points compared to last quarter, and 0.4 percentage points less than expected a year ago. For the coming two years, a total return of 5.6 and 6.0 percent is expected, which is also a change of 0.0 percentage points compared to last quarter. The participants’ expectations for 2013 have also decreased with 0.6 percent compared to the fourth quarter last year. The expectation for the period 2012-2016 is 5.9 per cent, which is a minor decrease of 0.1 percentage point compared to last quarter.

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

50 percent of the participants expect a total return of between 5.0 and 5.8 percent in 2012 20% 18% 16%

When will industrial turn around?

14% 12% 10% 8% 6% 4% 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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The expectations for industrial are also negative this quarter. The expectations for occupied space have decreased with 8.0 indicator points, while market rent has decreased with 3.5 indicator points compared to last quarter. Industrial is still the property type, for which the participants have the lowest expectations a year from now. However, it seems that there is more focus on industrial on a European level, as the income return gets more attractive due to the decreasing capital values. The question is: when will the turn around take place? According to this quarter’s consensus survey, it will not happen in the coming year in Denmark. The participants still do not have any expectations towards major increases or decreases in capital value and occupied space for the office and retail sector, however, their expectations for market rent has decreased. The expectations for residential are still fine with 13.1 in indicator value for occupied space, 11.9 for market rent, and 23.8 for capital value. This is the highest expectation for residential since the beginning of the consensus forecast back in the first quarter of 2011.

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 residental capital value (indicator values between -100 og 100) October 2012 Office

Capital value Quarterly change

Annual change

4,8

1,4

6,0

October 2012

Occupied space Quarterly Annual change change

1,2

-1,1

-7,1

October 2012

Market rent Quarterly change

Annual change

-9,5

-8,4

-3,6

1,2

-1,1

14,3

3,6

2,4

9,5

-7,1

-0,3

10,7

Industrial

-25,0

0,0

-1,2

-25,0

-8,0

-7,1

-27,4

-3,5

-9,5

Residential

23,8

4,5

19,0

13,1

2,9

3,6

11,9

-5,1

4,8

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 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 23.8 is feasible by 23.8 per cent of the participants answer ‘much higher’ and the remaining answers ‘unchanged’.

Published by the Danish Property Federation.


THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK OCTOBER 2012

Growth in regional centres

WEB REPORT

Highest expectations for capital value in the regional centres

There is no faith in capital value outside the major cities, which have been the strongest regional centres in the last couple of years. This is the conclusion of this quarter’s forecast. In the property business they fully agree that the capital value growth will be higher in the regional centres than in the rest of the country. Copenhagen is still the strongest centre, while Aarhus and the triangle region also show some growth this quarter. Since the beginning of the consensus forecast in the first quarter of 2011, capital value growth will be relatively higher in Copenhagen, then Aarhus, and the triangle region. In this quarter’s consensus survey the rest of the country gets the lowest score since the beginning of the survey.

Economic growth expected

42 market players participated in this survey. 45 % of the participants are property owners, 12 % are banks/mortgage providers, 21 % are commercial brokers, and 21 % 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, DNErhverv, DTZ, EDC Erhverv Poul Erik Bech, FIH Erhvervsbank, Finanssektorens Pensionskasse, Jeudan, Karberghus, NCC Construction Danmark A/S, Nordea, Nordea Ejendomme, PFA Ejendomme, PKA, RICS Nordic, Sampension, Sadolin & Albæk og Sinding Gruppen.

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The Danish Economic Councils expect increasing but low growth in the coming years. They estimate that the growth in GNP for 2011 will be 1.0 percent. In 2012 the growth is expected to increase to 1.3 percent, in 2013 GNP is expected to be 1.2 percent, while the growth is expected to increase to 1.5 percent in 2014. The relatively low economic expectations for growth, means that it will probably take some time before property will give a total return of 8.4 percent, the average return over the last 10 years. Right now it is construction that suffers the most. Construction activity is at a historical low, which means that there might be a demand for the unoccupied space.

Source: The Danish Property Federation 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.

About the Consensus Forecast These results from october 2012 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 by the Danish Property Federation.

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