Investors in UK real estate remain set for double-digit returns this year, according to the Investment Property Forum (IPF).
In its quarterly review of industry forecasts, IPF said sentiment across all major property sectors had improved.
A return of 12.4% from real estate is predicted for this year.
Last year’s peak – regarded now as the apex of the current market cycle – is unlikely to be repeated, IPF said, with 2015 expected to be “subdued”.
With figures for last year still being finalised, IPF said 2014 was forecast to have achieved 18.9%.
The figure is above the 17.9% total return reported by the Investment Property Databank’s quarterly index.
The forum’s Consensus survey found that, this year, capital growth rates are set to fall in all sectors, with market expectations subdued beyond 2016.
“Despite real estate maintaining its relative attractiveness against low-yielding bonds, capital growth rates are expected to fall back across all sectors,” IPF said.
The “relatively strong expectations” for this year are not sustained through the remainder of the forecast period, IPF added.
The average five-year return has fallen to 7% from 9.2% as a result of weaker expectations for 2019.
Reacting to the survey, Capital Economics said it agreed with the more positive outlook for yields.
However, the research consultancy said the strength of the UK’s rental recovery may have been underestimated.
IPF’s survey predicts 3.3% rental growth across all sectors.
“We are more optimistic than the consensus on the outlook for rental values,” Capital Economics said, forecasting growth of 4.2% this year and 3.4% next year.
Capital Economics expects capital values to rise by almost 9% this year, generating a total return of around 14%.
In 2016, the consultancy sees capital value growth of around 6% and a total return of 11%.