Real Estate investments can deliver returns in 2012

By Bridging Loan Directory -

 

Aviva Investors believes that returns in the real estate market this year will come from focusing on quality assets that provide secure income streams and are low in risk. While prime real estate assets are the main focus for the year investors would also be prudent to keep an eye on secondary real estate reports Property Funds World.

Ian Womack, Global Chief Executive for Real Estate at Aviva Investors, says: “Last year, against a difficult macro backdrop a number of real estate markets delivered robust returns to investors, with the UK in particular returning 8.1%[1] across the year. While some challenges remain for 2012, on the whole we expect the relatively low risk qualities of real estate (compared to other risk assets) will bring resilience to the sector should investor sentiment deteriorate.

“In the UK, continued risk aversion means that the low risk qualities of prime real estate remain appealing to many investors. Supported by favourable relative pricing and potentially further quantitative easing, we believe high quality assets with long leases will also prove resilient. Over the medium term, the income producing qualities of real estate should provide respectable returns.

“Although we think prime real estate is the more preferable asset in today’s markets, over the next year or so pricing adjustments are also likely to create opportunities for secondary real estate.”

“In Europe, our forecasts have been revised downwards due to deteriorating income growth prospects and the fact that policymakers are yet to deliver an effective response to the sovereign debt crisis. Against this backdrop, some markets will perform better than others.

“The appeal of safe haven assets in Europe will typically see investors look to the most liquid markets offering strong, income secure assets; such as, German, France, Benelux and the Nordics. However, peripheral markets may offer cyclical opportunities for investors, especially given the possibility of very strong policy responses.”

“While there is a strong possibility that Asia Pacific will experience slower economic growth in 2012, most countries will benefit from having low levels of indebtedness and effective policy tools at their disposal should conditions continue to deteriorate.

“We forecast strong returns in Australia’s retail, office and logistics sectors. Tokyo also offers a compelling case for investment as it has reached a good point in the economic cycle. Hong Kong and Singapore’s exposure to the global economy means they may experience bouts of weakening sentiment. “

“Looking at the US, occupier market data suggests we reached the start of a recovery phase in mid 2011 with vacancy rates beginning to decline. So far, the recovery has been largely confined to prime real estate and this market polarisation will continue this year. Income risks and the potential for debt related distress are important factors that investors should remain aware of. However, on the whole the US commercial real estate market offers investors a wide range of opportunities.”