THE DANISH PROPERTY FEDERATION MARKET STATISTICS – CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK April 2016
WEB REPORT
Increased expectations for total return
Results • Good return on investment properties the next five years
• Total return is expected to be 5.8 percent • Record-breaking confidence in Industry • Best result for Odense in two years
Fine prospects A total return of 5.8 percent is expected in 2016, 2017, 2018, and during the period 2016-2020. The majority of the participants expect that there will be minor progress from 2016 to 2018. 52 percent of the participants expect an increase in total return, 19 percent believe in a decreasing total return while 29 percent expect an unchanged total return.The differences are so small that the average total return is 5.8 percent for both 2016 and 2018. Compared to last quarter, it is an increase of 0.1 percentage points in 2016 and 0.2 percentage points in 2017. The annual change in total return is 0.3 percentage points for both 2016 and 2017. 2016 and 2017 have never had better expectations before. Concerning 2016, nine quarters have been covered, and for 2017, five quarters.
2016
2017
2018
20162020
Total return
5.8
5.8
5.8
5.8
Quarterly change
0.1
0.2
New
New
Annual change
0.3
0.3
New
New
Source: The Danish Property Federation Market Statistics. 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.
Increase in total return in 2015 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
Two types of return are included in total return: 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 the beginning of the period. It is worth
Source: IPD Denmark Annual Property Index and the Danish Property Federation Market Statistics. Total return for investment properties. 2000 to 2015 shows the total return of IPD Denmark Annual Property Index. 2016 to 2018 shows the average of the replies from the Consensus Forecast. 50 percent of the replies lie within the blue lines.
More faith in Industry (indicator values between -100 og 100)
Capital Value April 2016
Quarterly change
Occupied space
Annual change
April 2016
Quarterly change
Market rent
Annual change
April 2015
Quarterly change
Annual change
Office
27.1
-2.9
-1.6
21.9
-4.9
4.9
14.6
-1.0
3.9
Retail
21.9
1.9
-3.7
9.4
-4.0
3.0
15.6
0.1
-1.4
Industry
18.8
11.0
11.3
10.4
1.5
7.2
4.2
0.8
9.5
Residential
29.2
-0.6
-14.5
9.4
-4.0
-4.5
21.9
-4.8
-5.8
Source: The Danish Property Federation Market Statistics. The participants have answered: ‘very low’, ‘lower’, ‘unchanged’, ‘higher’, ‘much higher’. The answers represent a value which forms the basis for 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 18.8 is feasible by 18.8 percent of the participants answering ‘much higher’ and the remaining answers are ‘unchanged’.
Published by the Danish Property Federation
THE DANISH PROPERTY FEDERATION MARKET STATISTICS – CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK
noticing that the total return is before any financial expenses such as interest expenses and before inflation. This means that a total return of 5.8 percent must cover possible financial expenses and inflation. As you take a risk by investing in property compared to e.g. Danish bonds, the remaining return can be seen as a payment for working with property instead of investing in Danish bonds.
April 2016
WEB REPORT
which Odense has been included, but it is not enough to change the fifth place position. 52 percent of the participants have replied that Odense is better than fifth place, but there is still a gap up to number three and four; the Triangle Area and Aalborg. In sixth and last place we find the rest of the country, defined as the areas outside the centres.
Growth in Industry This quarter’s consensus forecast is the best ever for the Industry sector. The expectations for capital value and occupied space have never been better for Industry since 2011, where the Danish Property Federation launched the consensus forecast. Especially expectations for capital value growth have increased for Industry. Industry still has the lowest expectations for capital value compared to the other sectors, but the difference is no longer so evident. Residential still carries the highest expectations for capital valuegrowth, although this has slowly decreased during the last four quarters. This could indicate that Residential has increased to an extent thatthe same growth rates cannot be expected in the future . All indicator values for capital value, occupied space, and market rent are still positive, even though Residential and Office have minor negative quarterly changes.
Capital values expected to increase in the economic centres Regional indicator Low regional growth Medium regional growth
High regional growth
Odense moves up In the present calendar year, capital value growth ismeasured in the following areas: Aalborg, Aarhus, Copenhagen, Odense, the triangle area and the rest of the country. The expectations are unchanged in the economic centres, meaning that there is a greater trust to the marked of Copenhagen, followed by Aarhus. The race is tight between the Triangle Area in third place and Aalborg in fourth place, while Odense obtains fifth place in this forecast. This is the best result over the eight forecasts in
Source: The Danish Property Federation Market Statistics. 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.
About the forecast These are the expectations for April 2016 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. 48 market players participated in this forecast. 44 percent of the participants are property owners, 23 percent are commercial brokers, 10 percent are banks/mortgage providers, and 23 percent are other players. Please find below the names of some of the companies, which have contributed: Aareal Bank, Aberdeen Asset Management, ATP Ejendomme, Bertélco Ejendomme A/S, BBN Consult, BRF Kredit, Carlsberg Byen, CBRE, Chr. Hjorth Erhvervsejendomme, Colliers international Danmark, Cura Management, DADES, Danbolig erhverv Johnny Hallas, Dansk Ejendomsmæglerforening, DTZ, EDC Erhverv Poul Erik Bech, EY, Jeudan, Karberghus, Lokalebasen.dk A/S , Lund & Lindhardt, NCC Construction Danmark A/S, Nordea, Nordea Ejendomme, Nykredit , PensionDanmark, PFA Ejendomme, PKA, PostNord Real Estate, PwC, Realkredit Danmark, RICS Nordic, Sadolin & Albæk, Sampension, SEB Pension, Sinding Gruppen, Situs, Spar Nord Bank, Taurus Ejendomsadministration, Thylander Gruppen, TLK, Wiborg & Partnere.
Published Udgivet byafthe Ejendomsforeningen Danish Property Federation Danmark