UK property’s short-term panic is hiding long-term bullishness, a panel at the Estates Gazette Finance and Investment Summit said this week.
Richard Dakin, managing director of CBRE’s Capital Advisors, said that investor sentiment took an immediate hit following the referendum, although there were opportunities in long-term leases.
He said that the Brexit vote was not akin to the 2008 financial crisis, and that the market had liquidity and plenty of new lenders. “While I am a bull in terms of property as an asset class, you can’t ignore investment sentiment,” said Dakin.
“Short term, I’m concerned that we’re already seeing some price corrections happening. It’s happening where there’s greater risk. If you have long-dated income, that remains extremely attractive. There’s not much of a price correction in that.”
Commercial real estate is expected to see a 5-10% fall in values in the next 12-18 months, however. Robin Martin, head of research at Legal & General IM, said: “It’s not 2008, but it isn’t ideal.”
Dakin said there was a “Mexican standoff” between buyers and sellers now as the market figures out pricing and adjusts to it.
The panel, which also included Alex Price, chief executive of Palmer Capital, and Paul Clark, chief investment officer of the Crown Estate, called for a change to the structure of open-ended funds.
They said that because the funds are subject to daily trading on long-term illiquid assets, they are prone to short-term volatility and shock, as evidenced after the 23 June vote.
Martin said that Legal & General saw volatility in its property fund die down “in a few days” as investors exited and returned “quite quickly”.
He said: “Unless there’s a change in the structure of those funds, they remain subject to those flows, which can be severe.”
