Why property will outperform bonds

peter@chiltonscomputers.co.uk, September 17, 2017, Financial, 0

Another promising growth area is commercial properties outside expensive central London. These must still be well connected to main roads, such as the M25, and situated in areas where people want to live and work.

Interest rates appear set to stay low for some time to come, so investors are looking to UK commercial property, which offers a steady and reliable income yield over the long term. Between 2000 and 2017, income formed the core component of total return for property investors, delivering 74 per cent of the Investment Property Databank monthly index total return.

At a time when equity markets are reaching historic highs, property gives investors important diversification. It also offers an illiquidity premium to investors.

The UK commercial property market is in a fundamentally strong position with low overall vacancy rates. In the wake of the Brexit vote, there is muted development around the UK. The City is an exception to the rule, because the lead time for the planning process is so long that many of the buildings rising out of the ground now were started before the Brexit referendum was announced.

Even the June 2017 general election, which resulted in a hung parliament, has not interrupted the property market’s trajectory. Valuations are up across all property sectors.

The weak pound makes investing in UK property especially appealing to overseas investors. A little over a month after the general election, the record-breaking £1.3bn sale of London’s iconic Walkie Talkie skyscraper to Hong Kong investors boosted confidence.

Britain is evolving in the wake of the vote to leave the EU. In today’s uncertain environment, carefully selecting opportunities that match demand is more important than ever before.

At present, vacancy rates are low. There is strong demand for the right property, at the right time, at the right rent.

In the first quarter of 2017 there were many events approaching with the potential to disrupt the market. The general election was scheduled and Brexit negotiations were starting to take place. Prudent investment managers therefore built up high cash reserves.

Tenants are taking a similar approach – playing it safe when renting commercial space. They are generally looking for smaller premises of less than 15,000 square feet, making larger properties harder to let.

Key Points

The UK commercial property market is in a fundamentally strong position.

Commercial properties outside expensive central London are a promising investment.

Warehouse storage and distribution facilities are much in demand due to internet shopping.

Read More at

https://www.ftadviser.com/investments/2017/09/13/why-property-will-outperform-bonds/

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