Real Estate Returns Improve Worldwide

Last year returns were up in 58 of the 60 markets tracked in IPD’s , which provides real estate performance data on key markets in 24 countries. With a total return of 22.5 percent, London led the pack, followed by Washington, D.C., which was the only other major market in which returns exceeded 20 percent.

U.S. cities saw some of the strongest gains last year, with all 16 tracked in the report moving from negative total returns in 2009 to positive returns in 2010. Capital value growth was the main performance driver in New York and Washington, D.C., while recovery was more evenly balanced between capital value growth and income growth in other U.S. cities.

The recovery timeline varies more across European markets. London, Paris, and Stockholm, Sweden, continue to outperform faltering markets in Spain and Ireland, as well as the relatively stable markets in Germany. For example, Frankfurt, the leading German market, saw only a 3 percent return in 2010, while Paris and Stockholm both experienced returns in excess of 10 percent.

During the past five years, annualized total returns exceeded 10 percent in Calgary, Alberta; Vancouver, B.C.; Perth, Australia; Johannesburg, South Africa; and Cape Town, South Africa, compared with the five-year average for primary markets of 5.2 percent. Demand for resources and commodities from these countries may have contributed to these results. Inflation also may have played a role in driving up nominal returns in the South African cities, as returns are measured in local currencies.