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Wednesday, 26 February

Property Values Stable in Uncertain Times

With the financial markets showing a great deal of fluctuation in recent weeks (share prices, international borrowing costs and currencies) it is perhaps unsurprising that property remains the steady-Eddie for investors.

Turbulence in the markets has been caused by the looming fear that the US Federal Reserve will reduce down its monthly commitment to quantitative easing. Currently the US economy benefits to the tune of $85bn.

According to the IPD UK Monthly Property Index (measuring ungeared total returns to directly held standing property investments from one open market valuation to the next), UK property remained stable in July at 0.8% - with capital values at the headline level growing for a third consecutive month (0.2%), income returns (0.6%), bonds (1.0%) and equities (6.6). Offices returned 1.0%, industrials 1.0% and retails 0.5%.

London and the South-East property markets slowed while the regional markets grew. Industrial units around the UK are now seeing capital growth, as well as office markets around the South-West.

The retail sector, which continues to deliver the lowest returns off the back of still negative capital movements, saw a recovery in regional markets. Standard shop units across the South East, Midlands and South West saw rising returns as capital declines either eased or halted, while shopping centres and retail warehouses recorded improvements.

Phil Tily, the IPD’s Executive Director & Head of UK and Ireland was not so ready to point to the US Federal Reserve and instead took positives from the BoE. He says: Mark Carney's recent announcement regarding future monetary policy should continue to encourage investors in and towards commercial real estate.

"Unless the UK meets any of his 'targets', then interest rates and bond yields are going to remain low and that means investors will continue to look for good value and income opportunities in the real estate sector. Instead he has put the interests of big business first, before legitimate environmental concerns and the interests of local residents that will be affected by his decision."

Article written by ThisWeekinFM


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