UK property delivered strong total returns of 13.1% last year, according to the IPD UK Quarterly Property Index, but a poll at the launch event revealed that investors were worried about the impact of the EU referendum on the market this year.
Offices returned 3.6% in the last quarter which saw it retake the lead as the top-performing market sector. This sector finished the year with a 17.6% year-on-year total return.
Retail remained a market laggard with a return of 9%. Industrials returned 16.5% for the year.
MSCI said results for the final quarter showed signs of further price stabilisation while rental values continues to improve as business confidence picked up across the UK.
Yield impact added 5% to the annual returns, with rental value growth adding 4%, it said.
Malcolm Hunt, executive director, MSCI, said: “The 2015 unleveraged UK direct real estate return of 13.1% represented a third year of double digit returns for UK real estate, out-performing the other mainstream asset classes over one, three and five years to December 2015 and narrowing in on bonds over a 10-year period.”
Christopher Fry, director, LaSalle Investment Management, added that while low interest rates continued to support capital inflows to the property market and values, “the “triple high of capital flows, prices, and returns faces some risks due to the denominator effect on real estate allocations given recent large movements in stock market values and sovereign wealth funds showing signs of repatriating capital”.
At the IPD/IPF Property Investment Seminar on Tuesday, the looming referendum on the UK’s membership of the European Union (EU) weighed heavily on UK investors’ minds.
A poll at the seminar showed 78% of the audience thought leaving the EU would have an adverse effect on the property market. However, 89% of the audience believed the UK would not leave the EU.