The rate of decline in property values slowed significantly in January, in a sign that the sector may be staging a recovery.

Monthly figures from the Investment Property Databank shows the rate of value falls more than halved in January compared to December and November.

Total returns on the IPD Monthly Index for January were -1.6%, showing an improvement on the December 2007 total return of -3.7%, and giving 12-month total return of -7.6%.

Capital growth ‘improved’ from -4.2% in December 2007 to -2.0% in January, whilst income return edged up to 0.5%. Rental value growth decreased slightly from 0.2% in December to 0.1% in January.

Commercial property significantly outperformed equities, where returns were -8.7%, but lagged behind property equities which reached 4.8%.

The leading sector was still offices with a total return of -1.5%, whilst the industrial and retail sectors returned -1.6% and -1.8% respectively.

Malcolm Frodsham, IPD’s research director said: “The index had the worst January on record but at least the rate of decline has attenuated following the write downs in November and December. The index is back to where it stood in June 2006 and commercial real estate has still returned a healthy 9.0% pa total return over the past 3 years”