Property a selective buy across all sectors in London
By Bridging Loan Directory -
Property continued to be a selective buy across all sectors in Central London and the South East, ranging from 36 per cent of the respondents’ preference for Central London industrials to 86 per cent for South East industrials, according to the latest Property Pricing Survey from Colliers International.
Other geographic locations remained mainly sale targets across all sectors by 21 per cent to 43 per cent of respondents.
The north-south divide has continued from the March 2012 survey, with the south a buy and the north a sale.
2012 total return was again revised downwards, quite sharply by 260 bps (250 bps March survey) to 1.0 per cent pa from 3.6 per cent pa in the March survey (6.1 per cent pa November 2011).
Total return for 2013 was also revised downwards to 6.1 per cent pa, a 100 bps drop from the March survey of 7.1 per cent pa (7.9 per cent pa November 2011 survey).
Yield movement for prime saw on average 29 bps increase which was greater than that seen in the March survey of 16 bps.
Secondary yield outward movement was greater with an average of 56 bps across all sectors. Secondary property is bearing the brunt of negative sentiment.
Prime continued to be overpriced except for offices and distribution, unchanged from the March 2012 survey.
Secondary was underpriced except for secondary retail units and shopping centres.
Rental growth for 2012 was again downgraded, on average by minus 60 bps with all sectors forecasting negative growth at minus 1.6 per cent pa on average. Rental growth for 2013 improved from 2012, although remaining negative at minus 0.3 per cent pa. Office, retail warehouse, industrial and distribution rental growth moved into positive territory for 2013.
Capital growth for 2012 was more aggressively reduced than rental growth, by an average of 280 bps. For 2013 only two sectors remained in negative territory – business parks and retail shop units.
For reasons to invest in property now, 43 per cent of respondents said income; 43 per cent said property provided a beneficial yield level compared to the other asset classes, especially when compared to government bonds; and 36 per cent said property benefited from low volatility.
Asked what effect the eurozone uncertainty was having on the UK property market, most responses were negative: 43 per cent of respondents said it was contributing to a lack of confidence for both the economy and business and 36 per cent said it delayed formative decision making.
Asked what proportion of property lending will be undertaken outside the banks in a year’s time, only 43 per cent of the respondents provided a figure – which was in the range of 10 per cent to 40 per cent of new lending to UK property.
Fifty per cent of respondents said that they would invest in infrastructure, but there were words of caution.