UK property returns last year were -3.4%, which is better than early indications had suggested.

The Investment Property Databank annual index, published today, showed strong rental growth of 4.6% cancelled out by a fall in capital values of 7.7%.

Figures based on the IPD monthly index indicated a total return of -5.5% for the year with capital values falling 10%. The quarterly figures showed an annual return of -4.4%, with capital value falls of 8.6%.

The IPD annual figure is based on valuations and rental income from £137bn of property across the UK. The quarterly figure is based on a sample of £120bn, and the monthly £51bn.


Property underperformed both equities and bonds last year, which returned 5.3% and 6.4% respectively.

The IPD sounded a cautious note for property in 2008. ‘All eyes should now be focused on the occupier markets: a weak economy will feed through to weaker rental growth but any strong economic news should bring buyers back into the sector,’ IPD research director Malcolm Frodsham said.

Offices were the best performer in 2007, returning -0.5%. Retail was the worst performer, returning -6.1%, while industrial returned -3.4%.