The strong capital growth story is expected to taper sharply after this year, dropping to just 0.5% by 2018. This slowing value growth is reflected in falling total return predictions, which are forecast to drop to 6.1% by 2018. Income return is expected to be more stable, although also anticipated to ease from 5.9% to 5.6% over five years.
The Investment Property Forum noted that there was a continuing wide range of forecasts from the 30 fund managers and property advisers it surveyed. It said this could be a divergence of opinion between those that believe the economy and property markets are seeing a genuine, sustainable pick-up, and others who may be sceptical that the recent recovery will not last. At the sector level, offices and industrials are expected to outperform the retail sectors particularly in the near term – albeit with the exception of retail warehouses.
Rental growth is also expected to be far superior for offices compared with other sectors, driven by strong growth in central London, particularly the West End in the near term. Shopping centres are expected to see the weakest growth.
bridget.oconnell@estatesgazette.com
