Date Published 03 November 2011
The property market has experienced some significant highs and lows since 2008 but is now steadily regaining favour among investors as property-focused investment companies are proving a source of much sought after income.
Here, the Association of Investment Companies reveals the findings of its survey of property managers' views on the outlook for the sector...
Positive returns The increasing attraction of property for investors can be seen in the discount movement from 32% at the end of September 2008 to 6.5% at the end of September 2011 for the Property Direct - UK sector. Income is a strong pull for this sector with yields currently averaging 6.3% but returns have been positive too, up 23% over the last three years to the end of September 2011 compared to the average investment company increase of 18%.
Jason Baggaley, Manager, Standard Life Investments Property Income, said: "Despite heightened volatility and unprecedented uncertainty resulting from the ongoing euro zone problems, UK Commercial Real Estate continues to be one of the few asset classes to provide reasonable positive returns over the year to date.
Richard Kirby, Manager, F&C Commercial Property Trust said: "The property market has proved remarkably resilient in the face of slow domestic economic growth, fiscal austerity, a stalling of economic recovery overseas and the European crisis. There has been two years of sustained growth following a severe downturn. The initial sharp bounce-back, has been replaced by a year when performance has been largely driven by income. In September 2011, the annual total return was 8.7%, of which 6.9% was attributable to income.
Although the long term outlook for property is positive, investors must be prepared to weather any storms which may result from recent volatility. Despite some softening in the prices for poorer quality stock, reasonable positive total returns are expected over the next few years for investors as yields compensate for any modest capital declines."
Julian Walley M.N.A.E.A. M.A.R.L.A Senior Manger at the Wallingford Office comments: Property is still a reliable source of income. Higher personal taxation and reduced pension contributions as well as an all-time low interest rates have contributed to the growing importance of income from property to private investors