The total return on direct investment in properties in Canada was 8.2% in 2003, down from 8.9% in 2002, 9.3% in 2001 and 12.1% in 2000.

The 2003 results were announced today by Investment Property Databank (IPD) and the Canadian Institute of Real Estate Investment Managers (ICREIM).

“During the past five years as a whole, property has outperformed both stocks and bonds”, said Phil Tily of IPD. “However, the rebound in the stock market in 2003 meant the return on equities, at 27.1%, outpaced that of property last year. Property returns, however, continued to outshine returns on bonds at 4.4%.”

According to the ICREIM/IPD Canadian Property Index, total returns in 2003 varied widely by property sector. The retail (12.1%) and industrial (11.7%) sectors both recorded higher returns in 2003, at 12.1% and 11.7% respectively.

The office sector lagged well behind, at 5.4%, as many investors wrote down property values in this sector of the market during the course of the year. Residential returns plummeted to 2.9%, a combination of softer income returns and value write-downs.

Ontario, which accounts for about half of the sample in terms of property value, emerged as one of the weakest performing provinces in 2003, with an overall return of 7.3%. Quebec’s performance was similar to Ontario, at 7.9%, as both recorded capital write-downs during the year.

Property values in the other two major provinces in the index — British Columbia and Alberta — rose over the year, boosting returns in these provinces to 9.7% and 9.9%, respectively.

The ICREIM/IPD Canadian Property Index replaces the Russell Canadian Property Index, which was discontinued at the end of 2002. A total of 15 pension funds, life insurance companies and real estate managers contribute property level information to the databank on a quarterly basis. At the end of 2003, the databank contained almost 1,700 properties, with a capital value of about $45 billion, which is estimated to be approximately 50% of institutional holdings and publicly listed vehicles.