Investor sentiment for the UK has improved, according to the latest IPF forecasts.
The UK Consensus Forecast for November 2015 predicts that all property returns will fall from an estimated 13.8% for the end of 2015 to 5.4% by the end of 2017.
In August, the 25 companies surveyed saw the rate of growth at just 4.9%, 50bps lower than current estimates.
Office returns both contributed to the increased positive sentiment and the most marked cut in predicted returns. Between the end of 2015 and 2017 returns are expected to slow from 18.2% (17.9% in August) to just 5.13%.
Future weakening is expected to come from a steep decline in capital growth, which is expected to be as low as 0.8% for 2017.
The slipping capital growth rates are also reflected in the other two main sectors, with industrial, for example, falling from 10.5% to 0.9%. Retail is forecast to slide to 0.5%, a less dramatic decline than other sectors as predictions for 2015 are just 7.1% for standard retail.
Rental incomes are not expected to take as steep a cut in growth rates over the coming two years.
Across all property, rental income growth is expected to slow from 4.1% at the end of 2015 to 2.7% by the end of 2017. Most of the slowing will be driven by the office market – from 8.5% to 3.3%. Retail is expected to continue a steady rate of growth of around 2.5% and 2.4%.
