News

Crisis-hit European cities offer sub-par global performance in 2011

News

Sophia Furber

29 June 2012

Investment/finance

European real estate delivered a poor performance on the global stage last year as the ongoing eurozone crisis crippled confidence, according to definitive new research from the IPD.

In its inaugural Global Cities Report, which analysed 60 cities worldwide, the research body found that European centres held 18 of the bottom 20 places as ranked by total return. They also took 17 of the bottom 20 slots as ranked by capital value growth.

Dublin held the bottom spot in both categories. It delivered a total return of -1.9%, lagging Portugal’s Porto on 0.6%, and an 11% fall in values, more than twice as much as Porto, which was the second-worst performer with a decline of 5.1%.

The IPD said that the high proportion of national debt as a percentage of GDP in Italy, Portugal and Ireland meant that returns in these countries had suffered from austerity measures and uncertainty.

At the other end of the scale, North American cities made up the majority of the top 10. This is partly because their property cycle lags behind Europe’s by about 12 months, meaning that Canada and the US could soon be hit by slowing returns, according to the IPD.

Calgary took the top spot with total returns of 21.6%, and also topped the capital value table with 13.7% growth.

This compares with London, Europe’s best-performing city, which just scraped into the top 20 with total returns of 11.2%, and capital value growth of 6%, putting it at 17th place.

Over a 10-year period, Johannesburg and Cape Town saw the strongest growth in values, with 7.5% and 9.7% respectively.

This compares with 3.6% for New York, 2.2% for London and -0.1% for Munich over the same period.

Over the longer term, Vancouver has seen the strongest capital value growth over five years with 2.5%, followed by South Africa’s Johannesburg and Cape Town.

Despite strong long-term growth, Johannesburg’s properties increased in value by just 0.4% in 2011 as investors returned to conventional cities such as London and New York.

Peter Hobbs, IPD’s senior director, said: “Global real estate is a tale of haves and have-nots. Institutions want safety, and now that means low-yielding prime offices or retail in safe havens around the world.

“As a result, there’s been a polarisation between the likes of Dublin and Madrid against the financial centres of London and New York and the commodity- rich cities of Calgary and Perth.”

European real estate delivered a poor performance on the global stage last year as the ongoing eurozone crisis crippled confidence, according to definitive new research from the IPD. In its inaugural Global Cities Report, which analysed 60 cities worldwide, the research body found that European centres held 18 of the bottom 20 places as ranked by total return. They also took 17 of the bottom 20 slots as ranked by capital value growth. Dublin held the bottom spot in both categories. It delivered a total return of -1.9%, lagging Portugal’s Porto on 0.6%, and an 11% fall in values, more than twice as much as Porto, which was the second-worst performer with a decline of 5.1%. The IPD said that the high proportion of national debt as a percentage of GDP in Italy, Portugal and Ireland meant that returns in these countries had suffered from austerity measures and uncertainty. At the other end of the scale, North American cities made up the majority of the top 10. This is partly because their property cycle lags behind Europe’s by about 12 months, meaning that Canada and the US could soon be hit by slowing returns, according to the IPD. Calgary took the top spot with total returns of 21.6%, and also topped the capital value table with 13.7% growth. This compares with London, Europe’s best-performing city, which just scraped into the top 20 with total returns of 11.2%, and capital value growth of 6%, putting it at 17th place. Over a 10-year period, Johannesburg and Cape Town saw the strongest growth in values, with 7.5% and 9.7% respectively. This compares with 3.6% for New York, 2.2% for London and -0.1% for Munich over the same period. Over the longer term, Vancouver has seen the strongest capital value growth over five years with 2.5%, followed by South Africa’s Johannesburg and Cape Town. Despite strong long-term growth, Johannesburg’s properties increased in value by just 0.4% in 2011 as investors returned to conventional cities such as London and New York. Peter Hobbs, IPD’s senior director, said: “Global real estate is a tale of haves and have-nots. Institutions want safety, and now that means low-yielding prime offices or retail in safe havens around the world. “As a result, there’s been a polarisation between the likes of Dublin and Madrid against the financial centres of London and New York and the commodity- rich cities of Calgary and Perth.”