The total return on the Finnish property investment market rose by 1.3% to 11.3% in 2007, the highest figure since 1998, according to KTI Property Index.
The total return on the Finnish property investment market rose by 1.3% to 11.3% in 2007, the highest figure since 1998, according to KTI Property Index.
Income return of 6.4% was slightly lower than the 2006 figure mainly due to increasing capital values in all property types. Capital growth reached 4.6%, up 1.5% on 2006, mostly due to decreasing yields and increasing rental values. Property outperformed the equity and bond markets, which produced returns of 8.1% and 2.8% respectively.
Retail was the best performing sector for the fifth consecutive year with total return reaching 15.8%. Capital growth for the sector stood at 8.5% in 2007. Strong consumer demand continues to increase tenants ability to pay rent and led to a high occupancy rate in retail premises. Several major retail properties have been completed in the recent years thus clearly improving the quality of retail supply.
Similarly to recent years the total return on offices remained lower than other sectors. Total return, however, increased to 9.7% due to stronger capital growth. Although occupancy rates has increased income return on offices was put under pressure by a larger amount of empty space. This is likely to increase even more in the future due to a large number of new office developments, particularly in the Helsinki Metropolitan Area.
The Industrial sector performed second-best of all the sectors in 2007. Total return reached 12.4% while the income return of 8.0% came in higher than in other sectors, but lower than ever before. Capital growth continued to increase reaching 4.1% thanks to a strong performance and rising values of the warehousing sector.
KTI Property Index measures un-geared total return on direct property investments in Finland, consisting of income return and capital growth. The KTI Index includes 21 major Finnish property investors, or EUR 19.1 bn worth of properties, thus covering over 60% of the total property investment market.