Pundits are predicting another strong run for property investment after a record-breaking year in 1998.
In Estates Gazette’s Preview of the Year (p42), DTZ Debenham Thorpe’s head of investment, Robert Peto, commented: “There will be more institutional demand for property because the price will be sufficiently tempting.
“The institutional market gears itself to the gilt rate. The 10-year gilt rate has fallen to 4.36% from 6.29% at the beginning of 1998.”
Greg Nicholson, head of investment at CB Hillier Parker, explained: “The CB Hillier Parker Average Yield is 7.5%, hence property is looking very attractive indeed. This should encourage investors to increase their weightings in property.”
The latest Office for National Statistics’ figures for property, for the third quarter of 1998, suggest that 1998 will be a record year. Total turnover in the quarter was £4.44bn, a significant increase over the £2.7bn in the second quarter.
Although net investment eased slightly, from £1.15bn to £908m (see graph), it brought total net institutional investment for the year to September 1998 to £3.315bn.
According to Nigel Fox of Jones Lang Wootton, investment in the City of London market alone last year is expected to be over £3.37bn in 184 transactions, £800m of this bought by funds, with UK property companies the biggest buyers.
In 1997 the overall total was £2.37bn and the highest-ever total was £2.5bn in 1989.
Nicholson added: “There is quite a lot of cash piling up, with the institutions sitting on more than £50bn. There is a considerable amount of latent activity in the market, with investors churning and realigning their portfolios in a number of cases.
“Lots of positive sentiment is just beneath the surface.”
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Insurance companies and pension funds |
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1998 looks like being a record year for investment |
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Total investment in property (3bn) to Q3 1998 |
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Source: ONS, Hillier Prker Investment Research |
