Total returns from property slowed in the first quarter of 2015 to 2.9%, down from 4.1% in the last quarter of 2014, according to MSCI’s IPD UK Quarterly Property Index.
IPD’s figures showed the total return index was up to 283.7 across all property types, with capital growth up 1.6%. In the previous quarter capital growth had been 2.8%.
Stalling growth rates in the office and industrial space emphasised the apparent slowdown.
Offices still returned 3.9% overall but this was down from 5.3% in the previous quarter. Industrial returned 3.4% down 230bps from the previous quarter.
Capital growth for industrial more than halved, down to 2.1% from 4.3%. Offices fared a little better down to 2.9% from 4.2%.
Other sectors, such as student housing and healthcare, saw less marked slowdowns in growth. Total returns were 2.8% down from the 3.5% of the fourth quarter of 2014. In capital growth terms, the slowdown was only 60bps on the quarter before to 1.4%.
Retail properties still showed weaker growth than other sectors, at 2%, but also suffered much less of a slowdown. The total return for the last quarter of 2014 was 2.7%, with capital growth down by the same level to 0.7%.
Income return growth stayed largely static overall at 1.2%, compared with 1.3% in the previous quarter from all properties. Marginal differences between the various sectors made the difference over the quarter, but headline figures remained the same quarter-on-quarter at 1.3% for retail, 1.1% for offices and 1.4% for industrials.
Property returns, however, remain stronger than in the bond or equity markets. At 17.9% the property market outperformed bond returns of 11.8% and equity returns of just 0.5% in the 12 months to the end of March 2015.
Only property shares remained a better investment over the year with a 28.1% return.
