Norwegian capital values fall at slower pace, says IPD

Capital depreciation eased considerably over the first six months of 2009, falling by –2.7%, according to the IPD Norway Bi-annual Property Indicator published today. This compares to –9.9% over the whole of last year, based on the IPD Norway Annual Property Index.


Capital values continued to fall across all sectors, led by the Office sector which
delivered a –3.2% capital growth. The Retail sector was most resilient over the
period under review, with capital growth of –2.2%, while the Industrial sector returned
–2.8%.

Market rental values fell on average by –3.8%, and explained the majority of the fall in capital values. Office was the hardest hit sector with a fall in market rental value of –5.9%. Yields have started to compress slightly, at 25 basis points to 6.7%.

The fall in capital values was offset by an income return of 3.1%, contributing to a positive six month total return up to 0.2%, an improvement on the -4.7% recorded for the whole of 2008.

By comparison with other asset classes, the Oslo Benchmark Equity Index (OSEBX) has returned 25% over the first two quarters of 2009, while bond markets have only returned 1.7%, as measured by the Oslo 5 year Stat Index (ST5X) over the same period. Property equities have returned 8.4%, according to the OSE Real Estate Index.

At the investment level, the best performing sector of the three principal markets was Industrial, returning 0.8%, while the poorest performer was Office which, at -0.2%, was the only market sector to record a negative total return. Total return for Retail was 0.6%.

Håvard Bjorå, Norway Country Manager at IPD, said: “The market has been through a painful time in which yields and rental values have moved in opposite directions causing a sharp fall in capital values over 2008. While market rental values

have continued to deteriorate over the first half of 2009, investors will be relieved with yield movement now showing signs of stabilisation.”

source : IPD