UK – Uncertainty over real estate investment trusts in the UK is “overdone” Merrill Lynch reckons.
“We think fears and uncertainty on bonds, yield compression, consumption and REITS, are all overdone,” Merrill said in a research note.
“There has been lots of speculation for months now on UK-REITs and the lingering doubt among domestic fund managers that REITs may not happen,” research analysts Robert Fowlds, Bernd Stahli and Alec Pelmore said.
“We think there is a better than 50/50 chance that REITs happen, and we expect full REIT legislation in the March 2006 budget, and perhaps a progress report with the Pre-Budget Report at around the end of November.”
The UK Treasury unveiled a discussion paper on REITs alongside the 2004 budget and says it is “committed in principle” to reforming the taxation of property investment. According to the Treasury web site, the government aims to legislate for a UK-REIT in the 2006 Finance Bill.
Referring to large UK real estate firms, the Merrill analysts added: “The UK majors are on an average discount to NAV [net asset value] of 19%, with the prospect of good results to come next month. We are not capitulating.”
The firm has a BUY rating on the sector and made bullish comments about Slough Estates Liberty, MWB and Land Securities.