Property bears at Credit Suisse First Boston have changed their minds about the sector and are telling investors to buy.
Analysts Alan Carter and Mike Prew believe that falling short-term UK interest rates will drive a recovery in the property market during the second half of this year.
They have upgraded company net asset value forecasts and now expect property shares to “modestly” outperform the stock market by the end of 1999.
Carter and Prew were the first analysts to predict correctly last year’s slump in property share prices.
CSFB switched its stance from underweight to overweight in a research note on the sector this week. The analysts argue that falling interest rates will make property easier to finance and pull money into the market. UK property will also benefit from US investment flowing into Euroland, the 11 countries that have joined the single currency.
Carter said that yields, which crept up during the last months of 1998 when the investment market ground to a halt, could fall by 0.5-1.0% by the end of this year.
He does not expect rental growth to top inflation, currently at 2.4%.
“Property’s increased financeability should break the buyers’ strike, with domestic investment augmented by US capital focusing on the UK as a beach-head into a unified Europroperty market,” he commented.Preview, p42
