Pan-European funds have seen total returns slide by 2.9 percentage points year-on-year, according to MSCI’s IPD Pan-Europe Property Funds Index for Q1.
Returns remained positive, up 0.4% on the quarter, but previously strong returns were calmed by volatile markets.
The lack of returns were most marked between the last quarter of 2015, at 2.8%, and the three months following, when capital value increases took a distinct downturn.
Direct assets were down to 0.5% of total returns from 2.9% in the previous quarter and 3.9% in March 2015.
This has caused the first negative return for capital values among all funds in two years at -0.8% during the first quarter.
Balanced funds, a subset of the funds measured, managed to keep their capital returns stable and they showed total returns of 1.1% over the first three months of 2016.
Even with the falling returns in capital, property funds managed to outperform the equity markets, which dropped by 4.8%, but fell behind the 2.8% returns posted by bonds.
Over 12 months the property markets have remained the most stable of the three main asset classes, however, with annualised returns remaining above both bonds and equities at 10.4%.
Bert Teuben, vice president at MSCI, said: “2016 began with much volatility in the markets. As a result, many asset classes experienced a slowdown in the first quarter. And to a large degree, the index basically moderated after several quarters of very robust returns.
“The slowdown in commercial real estate in the first quarter was recorded across all European regions. Still, real estate outperformed equities in Europe in the first quarter. On a 12-month basis fund level performance outperformed both equities and bonds.”
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