Global Property Stocks Dip in January

The dip is being attributed to nervousness ahead over an expected rise in US interest rates. The fall was due to largely North American property stocks, which posted a 3.8% fall in euros in January, while European and Asian stocks were up 2.2% and 3.9% respectively. The overall negative return meant property underperformed both equity and bond markets in January.

Despite the slump, EPRA's monthly report showed that property returned 28% in 2004 and has still beaten returns from equity and bonds over the longer term. Over five years, the annual compound return on EPRA's global property index is 10.3% against a 6.8% annual decline from equities, as measured by the MSCI global index, and 6.8% positive return on the JP Morgan global bonds index. Even in US dollars, North American property performed poorly in January, with an 8.1% fall in the US, while Canada's index returned 2.7%.

US REITS were hit hard during the month ahead of the expected interest-rate rises. The Federal Reserve is expected to increase interest rates for the sixth time to 2.5%. Essex Property Trust lost 14.1% in January, while Equity One lost 14% and Maguire Properties fell 13.9%.

The picture in Europe was very different where the introduction of REITS in France and their likely introduction in Germany and the UK have buoyed results. France was the best performing market in January with a 2.9% return, while EPRA Netherlands added 1.9%. The top performing European property stock was Finnish retail investor Citycon, which added 21%.

The Japan index pushed Asian stocks to new highs in January with a 5.7% return on the back of developer stocks. Residential developer Daikyo jumped 28.4% on news it will be taken over by Orix Corp.

The Australian market settled down a little after a spate of mergers and acquisitions among property trusts last year. The Australian index returned 44 basis points in January, while Singapore returned 1.5%. But Hong Kong was the worst Asian performer as investors took profits after last year's strong returns. The index lost 7.2% during the month.