Now is not the time to exit UK real estate, according to Cordea Savills.
Its chief investment officer, Kiran Patel, said that even with yields falling fast as a result of fierce competition, there was still space for more downward pressure.
Patel believes yields will fall further and it is too early to take the profits. Rising investor appetite and allocations to real estate, Patel says, “has never been so strong – and that demand needs to be fulfilled”.
Improving credit conditions – with more banks and new real estate debt investors providing financing – is helping to “oil the property market”, Patel added.
With an elevated spread between Gilt yields and average property yields, there is still a reasonable level of risk premia for investing in property, he added, while accelerating rental growth remains a fundamental support.
“Unlike previous property cycles where there was a quantum of development activity, this cycle has been fairly muted, particularly in the regions,” Patel said. “Today’s economic recovery is not constrained with a major overhang of prime or quality stock.”
The only risk, Patel said, was that UK real estate moves into expensive, overpriced territory.
“It all depends on the speed and quantum of activity,” he added.