Investment funds are returning to the property market at levels not seen since the before the global financial crisis, according to industry data. They are being drawn back by the prospect of rising yields as the economy edges towards recovery and property is, once again, seen as an attractive asset class.
During the recession property values fell by as much as 40 per cent, prompting many funds to close to redemptions. However, the latest figures from the Investment Management Association reveal that net sales of property funds rose to £98 million in April – the highest levels seen since 2011.
Even more encouraging, from a commercial property perspective, is that figures from the IPD Annual Property Index (covering the period to the close of 2012) show that returns for the industrial, retail and office categories were 6.8 per cent, 5.8 per cent and 5.5 per cent respectively.
These figures compare favourably with residential returns of 2.4 per cent, although total returns for this sector over the period to 31 March 2013 came in at 8.9 per cent, while the office category recorded returns of 4.7 per cent.
Bill McQuaker, multi-asset head at Hendersons, says the UK market is looking more interesting than it has for some time and now could be the right time to invest.
“The yields available look particularly attractive versus where commercial property has been historically.
“On a five-year view, even allowing for the sizeable transaction costs, we feel the returns on offer, particularly from a yield perspective, make this a good time to increase our exposure to this asset class,” he said.
Unsurprisingly, Investment Week reports that prime assets in the South East are proving the most attractive to property funds, but a wider improvement is expected as the economy recovers further.
