Real estate investment returns negative in 2020
In 2020, the total returns resulting from investment on Portuguese real estate assets were negative; with the MSCI Portugal Annual Real Estate Index dropping to -0.3%.
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This result was presented this Wednesday and it shows the effects of the pandemic on the sector and, in particular, how it had a negative impact on retail, which represents more than 56% of the Portuguese real estate market’s sample analysed by MSCI. Compared with the 7.8% generated a year before, in 2020, the Index’s performance was highly penalised by capital appreciation, which evolved negatively, pulling down the results to -4.2%; counterbalanced by the rents’ returns positive contribution of 4.1%.

«Six years after the last time, the Index registered a negative asset appreciation once more. However, when analysing this result, we need to take into account retail’s dominant position within the sample of the Portuguese real estate market analysed by MSCI and, within that segment, the predominance of shopping centres which were, as we well know, the most impacted by Covid-19 within the Portuguese real estate sector», commented Luís Francisco, MCI’s Vice-President for the Portuguese and Spanish real estate markets.

When compared to other types investment, real estate was well behind both shares and bonds, which had returns of 6.0% and 4.8%, respectively. «But real estate is essentially a long-term investment and when viewed as such, the Index’s results show its resilience; with a 7.4% yearly return over the last 21 years, since the series began; surpassing all other types of assets».

MSCI Portugal Real Estate Index’s results were compiled based on a sample constituted by 5.331 assets owned by the 33 investment vehicles which took part in the study and which had a total of 8.7 billion euro on December 31 2020; giving this benchmark a coverage equivalent to 33% of our country’s real estate investment market.

Housing market continues in counter cycle

Looking at the behaviour of all the different real estate segments, only retail and hotels generated negative returns for investors in 2020, with -3.5% and -4.7%, respectively. On the other hand, offices generated the highest returns at 6.1%, followed by the industrial segment at 5.7% and housing with 4.4%. However, as remarked by Luís Francisco, «the housing segment was the only one which registered an improvement in terms of its performance when compared to the 3.6% generated in 2009», with this indicator contracting for all other real estate segments.

Portuguese retail had a -38% drop in its net operating income at the same time that this indicator had a positive evolution in the office (5.2%), housing (10.2%) and industrial (1.5%) segments.

Source: Iberian Property