Through careful stock selection and a short term bias towards offices, property equities in the UK and Europe could provide returns of up to 12-15% during 2007, according to a report by Henderson Global Investors.
Through careful stock selection and a short term bias towards offices, property equities in the UK and Europe could provide returns of up to 12-15% during 2007, according to a report by Henderson Global Investors.
Patrick summers, head of property equities at Henderson, said the introduction of REITs in the UK and increasing levels of interest in property equities from US institutional investors will also provide support to the global property equities markets during 2007 and beyond. 'Inflows into the property market are unlikely to slow down in 2007, which will partly contribute to the ongoing strength of property equities. With total returns currently around 8% on direct property, and higher returns from property equities, many investors will still be persuaded to enter the market,' he said.
'In the UK and Europe we forecast an average 8% total return per annum over the next one to three years in direct commercial property - this reflects an initial yield of around 5.5-6% plus long run income growth of 2-2.5%,'Summers said. 'Against this background, property companies which add gearing, development and other value enhancements, can deliver a total return in the 12-15% range, mainly from net asset value growth, we do not expect significant repricing (i.e. a change in the price / NAV or multiples of earnings), except perhaps among the major UK stocks as a result of the new REIT structure.'
Headquartered in London, Henderson is one of Europe's largest investment managers, with over EUR 91.2 bn assets under management and employs around 900 people world-wide.
