THE DANISH PROPERTY FEDERATION MARKET STATISTICS – CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK October 2016
WEB REPORT
Decreasing expectations compared to last quarter
Results • The expected total return in 2016 diminished by 0.2 percentage points. • The past five quarters, apart from this quarter, the expected total return in 2016 has increased. • Prosperity is retained regarding expected increasing capital value, occupied space and market rent. • … and the development applies both to office, retail, industry and residential.
2016
2017
2018
20162020
Total return
5.9
5.8
5.8
5.8
Quarterly change
-0.2
-0.1
-0.1
-0.1
Annual change
0.3
0.1
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.
50 percent expects a total return of between 5.5 and 6.25 percent in 2016
Have we reached the peak? It would be an exaggeration to conclude that the investment property market has reached the top based on this consensus forecast alone. The expected total return has increased the past five quarters. However, this quarter expectations are lowered. In 2016, a total return of 5.9 percent is expected. This is still a solid return even though it includes risk, possible funding and inflation. Further, expectations have decreased by 0.2 percentage points compared to last quarter, but increased by 0.3 percentage points compared to last year. In 2017 and 2018 the total return is expected to be 5.8 percent, which is a decrease of 0.1 percentage points compared to last quarter. The expected development of total return in the years to come still does not have consensus. Behind the figures, 30 percent of
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
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.
Still only positive indicator values (indicator values between -100 og 100)
Capital Value October 2016
Quarterly change
Occupied space
Annual change
October 2016
Quarterly change
Market rent
Annual change
October 2015
Quarterly change
Annual change
Office
28.7
-3.5
2.3
19.1
-2.0
-11.2
18.1
-3.0
-0.5
Retail
21.3
-4.3
-7.2
3.2
5.4
-14.5
17.0
0.4
-6.5
Industry
14.9
-6.2
-1.8
8.5
-3.7
0.7
8.5
0.7
1.6
Residential
27.7
-2.3
-7.6
9.6
-6.0
-3.2
23.4
2.3
-8.0
Source: The Danish Property Federation Market Statistics. The participants have answered: ‘very low’, ‘lower’, ‘unchanged’, ‘higher’, ‘much higher’. The answers give 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 28.7 is feasible by 28.7 percent of the participants answering ‘much higher’ and the remaining answers are ‘unchanged’.
Published by the Danish Property Federation