Switzerland has become Europe’s first real estate market to produce positive capital growth for 2008, at +1.2%, according to the IPD Switzerland Annual Property Index.

Switzerland has also produced the Continent’s highest nominal total returns for 2008, at 6.1%, a full percentage point down on 2007 but surpassing the 5.9% return recorded in 2006.

While other European countries have recorded resilient total returns, including Germany’s 3.5% and the Netherland’s 3.3%, the reasons for Switzerland’s property markets insulation from the credit crunch are different, according to Nassos Manginas, director of IPD Global. He said: “ Switzerland has a limited supply and with pension and insurances funds investing considerably in domestic property over the long-term there is, therefore, genuine market stability. However, early indicators over the year to date point to a mounting pressure on commercial property prices in 2009.”

The index revealed the retail sector, for the third consecutive year, produced the top sector returns, with 6.5%. However, despite this growth the return signifies a notable drop from 2007’s 10%, which could be the first sign of a slowdown in the sector. Residential total returns followed, with 6.1%, while offices returned 5.8% and industrial sector 6%.

Capital growth was recorded among all but one of the four main sectors, the industrial sector, which recorded -0.8% for 2008. This was, however, counterbalanced by the market’s strongest income return, at 6.8%. Capital growth for retail, residential and offices were 1.5%, 1.2% and 0.9%, respectively. All-property income was 4.9%.