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The Danish Property Federation Market Statistics – Consensus Forecast, January 2018

The Danish Property Federation Market Statistics

January 2018

WEB REPORT CONSENSUS FORECAST

Results • 2017 is expected to close with a total return of 5.8 percent • Great expectations to office and falling expectations to residential in 2018 • Historical high expectation to increasing market value within industry • The expectations were (almost) on target Positive closing of 2017

Participants’ expectations 2017

2017 is expected to close with a total return of 5.8 percent. This is unchanged compared to last quarter. The expectations for 20182021, has increased compared to last quarter. In 2018 and 2019 a total return of 5.7 percent is expected which is an increase of 0.1 and 0.2 percentage points compared to last quarter. The expectations for 2017-2021 have increased by 0.1 percentage points compared to last quarter and is now 5.6 percent. The expectations for 2017-2021 peaked in April 2017. In conclusion, it is expected that 2017 will end positively.

For 2017

20%

15%

expect a total return

expect a total return

of 5 percent or

of 7 percent

below.

or above.

15%

50%

expect a total

expect a total return

return between 5

Higher expectations now than in 2008-2014 The level of the total return is still acceptable. The expected total return for 2017-2019 lies above the level of 2008-2014. As such, a positive increase in value is expected while the direct return of properties will still be acceptable.

of 5.5-6.0 percent.

and 5.5 or between 5 eller derunder

5,5-6,0

6 and 7 percent.

2017

enten 5,0 og5,5 el 6-7

7 eller derover

For 2019

62%

50 percent of the participants expect that the total return will lie between 5.5 and 6.0 percent in 2017. 15 percent of the participants expect a total return of 7.0 percent or above while 20

38%

expect a total return of more than 5.0 percent.

expect a total return of 5.0 percent or below.

percent expect a total return of 5.0 or below in 2017. In 2019 38 percent of the participants expect a total return of 5.0 percent or below. 5 procent eller derunder

over 5,0

2017 is expected to have the highest total return 2017

2018

2019

2017-2021

Totalt return

5.8

5.7

5.7

5.6

Quarterly change

0.0

0.1

0.2

0.1

Annual change

0.0

-0.1

New

New

Source: The Danish Property Federation Market Statistics. Rem.: The average total return based on the replies is presented in the table. Total return is in percentage and shows return on investment property compared to the size of the investment in a given period. Total return consists of two types of returns: Direct return and return on value. Direct return is current net operating profit of the period divided by investments size at the beginning of the period. Return on value is the value added in the given period divided by the size of investment at beginning of period. Total return is before any financial costs and before inflation. Published by

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The Danish Property Federation Market Statistics – Consensus Forecast, January 2018

INTERAKTIV WEBRAPPORT FORVENTNINGER

The expectations to the total return 2017-2019 are above 2008-2014 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 2016 2017 2018 2019 Source: IPD Denmark Annual Property Index and the Danish Property Federation Market Statistics. Rem.: Total return for investment properties. 2000 to 2016 shows the total return of IPD Denmark Annual Property Index. 2017 to 2019 shows the average of the replies from the Consensus Forecast. 50 percent of the replies lie within the blue lines.

Positive expectations for office in 2018 The highest expectations for 2018 lie within the development of office properties. The highest expectations for an increase within capital value, occupied space, and market rent all lies within office. As such, expectations for office have never been higher. This might be due to the economic vacancy for office is still a little too high being 11.2 percent in October 2017. The economic vacancy for office should decrease even further which is also the expectations from the market participants. The second highest expectations in 2018 is within industry. Just as last quarter, the expectations to capital value have never been higher. The economic vacancy for industry is 11.1 percent in October 2017.

The lowest expectations are found within retail in 2018 although all three indicator values are still positive. The economic vacancy for retail is 6.8 percent in October 2017. Investors seek other sectors The expectations for the development within the residential sector has decreased since 2015. The expectations for occupied space within the residential sector have never been lower. The expectation for the market rent is now down at a 2011-level while the expectation for the capital value within the residential sector has not been lower since January 2012. The indicator values for residential are still positive but maybe the residential sector will experience its first negative indicator values in 2018? Nevertheless, it has been seven positive years for residential from 2011-2017.

Expectations of Capital Value within Industry has never been higher (indicator values between -100 og 100) Capital Value January 2018

Quarterly change

Occupied Space Annual change

January 2018

Market Rent

Quarterly change

Annual change

January 2018

Quarterly change

Annual change

Office

28.8

0.3

-5.7

28.8

1.5

11.0

23.8

-0.1

7.1

Retail

12.5

-3.4

-13.1

2.5

-5.5

-3.1

7.5

-7.3

-3.6

Industry

26.3

0.1

2.9

13.8

-3.3

-6.3

16.3

2.6

-1.5

Residential

17.5

-9.8

-14.7

1.3

-3.3

-6.5

8.8

-8.3

-7.9

Source: The Danish Property Federation Market Statistics. Rem.: The participants have answered: ‘very low’, ‘lower’, ‘unchanged’, ‘higher’, ‘much higher’. The answers give a value 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 26.3 is feasible by 26.3 percent of the participants answering, ‘much higher’ and the remaining answers are ‘unchanged’.

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The Danish Property Federation Market Statistics – Consensus Forecast, January 2018

INTERAKTIV WEBRAPPORT FORVENTNINGER

Copenhagen is still in front The highest expectations for positive development in capital value is in Copenhagen compared to all other areas in Denmark. 83 percent of the participants in this forecast choose Copenhagen to be the region in which the capital values will develop most positively. The ranking after Copenhagen is: Aarhus, Aalborg, Odense, and the Triangle Area followed by the rest of the country.

Expectations detector This implies how close this consensus forecast is to reality. The total return is the historic return on investment properties. 2017 will not be closed until February/March 2018. As such, the latest number is from 2016, where the total return were 9.2 percent based on the Danish Property Federation Market Statistics. In 12 forecasts, this consensus forecast counted on a total return of 5.5 and 6.0 which was too low.

The latest numbers for occupied space and market rent come from the Danish Property Federation Market Statistics October 2017. Annual changes from October 2016 to October 2017 for occupied space has increased for office (1.0 percent), retail (1.5 percent), and industry (0.8 percent) while occupied space for residential has decreased (- 0.7 percent). The annual change for the market rent is increasing in all four sectors. Residential had the highest increase in market rent from October 2016 to October 2017 with 3.5 percent, while the market rent for industry had the smallest increase of 0.3 percent. In the Danish Property Federation Market Statistics – Consensus Forecast October 2016 seven out of eight expectations were correct, as there were expectations of increasing occupied space and increasing market rent for all four sectors. The only wrong expectation was a small increase in occupied space for residential, however, there was a small decrease. In general, the occupied space of residential is so high that it is difficult to exceed a percentage higher than 96.5 percent as there will always be a natural economic vacancy. The expectations were (almost) on target.

Still highest expectations of increased capital value in Copenhagen Regional indicator Low regional growth Medium regional growth High regional growth

Source: The Danish Property Federation Market Statistics. Rem.: The map shows which regions in Denmark that have the highest capital growth compared to other regions. We have asked about the Triangle Region in Jutland (Fredericia, Kolding, and Vejle), Copenhagen, Odense, Aalborg, Aarhus, and all other regions as the rest of the country. From the replies, we have created an indicator. If the area is the lightest colour, at least 70 percent of the participants have agreed that this region is doing best compared to other regions. Published by

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The Danish Property Federation Market Statistics – Consensus Forecast, January 2018

INTERAKTIV WEBRAPPORT FORVENTNINGER

About the forecast These are the expectations for January 2018 from the Danish Property Federation Consensus Forecast. The objective is to create a more transparent property market. The Consensus Forecast is published on a quarterly basis and is very dependent on the participating companies’ good will to report data every quarter. Without these companies, the Consensus Forecast would never have been possible.

Further information If you want to know more about this publication then contact Chief Economist

Morten Marott Larsen mml@ejendomsforeningen.dk Phone +45 28 45 56 51

40 market players participated in this forecast. 43 percent of the participants are property owners. Furthermore, 25 percent are commercial brokers, 8 percent are banks/mortgage providers, and 25 percent are other players.

Please find below some of the companies which have contributed Aberdeen Asset Management, ATP Ejendomme, BBN Consult, Bertélco Ejendomme A/S, BRF Kredit, Carlsberg Byen, CBRE, Chr. Hjorth Erhvervsejendomme, Colliers international Danmark, Cura Management, DADES, Danbolig erhverv Johnny Hallas, DEAS, EDC Erhverv Poul Erik Bech, EK-Ejendomsadministration A/S, EY, Focus Asset Management, Jeudan, Karberghus, Lindhardt Erhverv, Lokale­­basen.dk A/S, NCC Construction Danmark A/S, Newsec Datea, Newsec Egeskov & Lindquist, Nordea, Nordea Ejendomme, Nykredit, Pensam, Pension­ Danmark, PFA Ejendomme, PKA, PostNord Real Estate, Prodomus, Probus Ejendomme og Investering, PwC, Realkredit Danmark, RICS Nordic, Sadolin & Albæk, Sampension, SEB Pension, Sinding Gruppen, Situs, Spar Nord Bank, Taurus Ejendomsadministration, Thylander Gruppen, TLK, Topdanmark Ejendom, Wiborg & Partnere.

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The Danish Property Federation´s market statistics - consensus forecast (January 2018)  

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