The Property Council/MSCI Australia Annual Property Index achieved a total return of 0.1% in Q4 2020, down from 7.6% the previous year. The total return results are the lowest figure recorded since the index began 26 years ago due to the decreased net operating income rather than income compression.
Whilst the Australian market continue to soften, led by Retail, returns remain resilient with Industrial and Healthcare continuing to report positive capital growth.
"Interestingly income return has continued to soften to unprecedented levels which is unique to this cycle, which may see capital values impacted more severely in the future. Office recorded negative capital growth suggesting some investors remain uncertain around future income and the impact of COVID-19 to the sector." Executive Director, Mitchell McCallum said.
Some of the key results to come out of the index release include:
- The annual total return for Australian commercial property in Q4 2020 was 0.1% with a 4.7% income return and (-4.4%) capital growth.
- Q4 2020 represented the lowest annual growth rate since Q1 2010, when asset values were beginning to trend upwards post global financial crisis.
- Retail total returns speed of decline slowed somewhat during the quarter to (-10.1%) for the year to December 2020, driven by rising income return, whilst capital growth continued declining with the worst performance since the Index started recording returns 26 years ago.
- Healthcare total returns increased on an annual basis, but quarterly returns indicate that they are slowing.
- As at Q4 2020, Office annual total returns continued to slow to 4.7%. 12 months earlier they were at 11.6%, and for the first time since Q3 2010 they have experienced negative capital growth.
- Industrial continues to outperform in the uncertain economic climate, posting an annual total return to Q4 2020 of 13.9%, compared to 11.5% 12 months earlier. This reflects Industrial's strong value proposition, as the move to e-commerce is accelerated by current market conditions.
For more information on the Q4 2020 results, click here.
Written by – Mitchell McCallum, MSCI