US investment bank Morgan Stanley is predicting a further drop in UK and continental European property share prices of up to 30%.
Analysts said that previous troughs in these share prices coincided with peaks in the margin between the EBITDA/EV yields on property shares and the corresponding five-year swap rate. EV is market capitalisation plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
“After allowing for expected moves in EBITDA and net debt, and assuming the lowest five-year swap rates ever recorded, there is still a further 28% potential downside in UK shares and 30% in continental shares,” said the bank.
