View more on these topics

Is property heading for a fall?


The Queen’s Speech last month saw the next step in the Conservative pledge to expand the Right-to-Buy scheme. But there are concerns the move could compound the UK’s housing crisis and put pressure on property investing returns.

The Tory pledge will see the right to buy homes at a discount extended to social housing tenants, where previously it has only been available to council tenants.

The discount is up to £104,000 in London, and £78,000 outside the capital.

While ministers say the money from sales will be ploughed back into new housing developments, Government data shows for the 26,185 homes sold under the scheme since 2012, just 2,712 new homes are being built.

With prices in the UK booming in recent years in both residential and commercial property, concerns remain around pricing and supply.

Standard Life Investments investment director of real estate Mark Meiklejon says: “We certainly don’t think property is in a bubble but there is always the danger there could be an overshoot in the weight of money chasing that relatively limited availability of good quality assets.”

Aberdeen Asset Management glo-bal head of property research and strategy Andrew Allen says: “There are issues about supply, not on the physical volume of new companies looking for space but of space. There aren’t lots of shopping centres being built or houses, office blocks, industrial estates, so the supply side is relatively constrained.”

He says for this reason managers need to be cautious about pricing, particularly in areas such as central London and the South-east.

Multi-manager Architas chief investment officer Caspar Rock says the Government is doing little to help these supply-side issues, with most of the pre-election pledges being around demand issues such as the Right to Buy scheme. However, he says any moves on easing planning laws, particularly on brownfield sites, and moves on property companies that are sitting on landbanks would help the supply issue.

For this reason some fund managers are focused on quality, stable assets rather than higher growth, riskier assets.

One such manager is TIAA Henderson Real Estate head of UK balanced funds and Henderson UK Property Oeic manager Ainslie McLennan. She is focused on primary, good quality properties in good locations with reliable tenants.

“If you lose a tenant in a good location and good quality building the chance is much higher of re-letting it than in a secondary location in a fragile occupier market.”

Worries about pricing have not stopped retail investors pouring their money into the sector. Last year the IA Property sector saw £3.82bn of inflows.

Inflows have continued to be steady this year, with the first three months alone seeing £1.1bn of net retail sales, according to IA data. The IA Property sector has also been among the top three most popular investment sectors for retail sales every month bar one for the past two years, ranking in third place last month behind targeted absolute return and Europe ex-UK.

But those flows are not expected to continue at the same pace.

Property managers are preparing themselves for outflows once something changes in the wider market – be that an interest rate rise or a slowdown of quantitative easing.

While a sharp increase in interest rates by the Bank of England is not expected, it would lead to bond yields improving and therefore looking more attractive in comparison with property.

Meiklejon says while at the moment property is a little expensive on an absolute basis compared with historical values, relative to other asset classes it offers good value but a rise in bond yields could hit that.

It is for this reason McLennan says she is very conscious of liquidity, having 20 per cent or more in cash at any one time while also having a higher Reit allocation than would be ideal to bring more liquidity into the portfolio. The team then groups assets into liquidity groups, knowing which they can sell off quickly if they need to.

Most managers are not expecting interest rates to rise any time soon and, when they do, increases are likely to move by 25 basis points each time. This will mean bond yields will creep up gradually. But managers say even a sharp change to rates may not cause a property exodus.

Meiklejon says: “An extreme rise would obviously have a major impact on relative pricing against other investment opportunities but the margin is so wide there is a fair bit of room in that for rates to tick up slowly and not affect the asset class.”



Warning over ‘black market’ in pensions data trades

Government and regulators must act to stop the trade in hundreds of thousands of individuals’ pension data, say experts. Last week, staff at some the country’s largest providers were approached by a firm trying to sell the personal information of over 170,000 people with personal pensions and supposedly interested in transferring out of schemes. The […]

Pensions-savings-retirement-piggy bank

Ombudsman rules against providers over pension transfer delay

The Pensions Ombudsman has upheld a complaint against Axa Wealth and St James’ Place following a bungled pension transfer from 2012. Graham Burton complained that SJP took an unacceptable amount of time to send a £191,000 transfer cheque to Axa Wealth after it disinvested his drawdown pension. Burton says he suffered financial loss as an […]

Tilney Bestinvest hires new CFO

Tilney Bestinvest has appointed Stuart Layzell as its new chief financial officer. Layzell has previously worked at PwC, the private equity arm of Lloyds – LDC – and helped to launch the Business Growth Fund. Most recently he worked for private equity-backed technology companies Fourth and Isotrak. The CFO role at Tilney Bestinvest is new. […]

FCA logo glass 620x430

FCA hits Lloyds with record £117m fine over PPI complaints

The FCA has fined Lloyds Banking Group a record £117m for failing to properly handle payment protection insurance complaints. The fine, issued against Lloyds Bank and Lloyds subsidiaries Bank of Scotland and Black Horse, is the largest ever retail penalty issued by the regulator. The bank is now reviewing or automatically upholding around 1.2 million […]


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. regardless of the impact on house prices it is utterly disgraceful to subsidise people being able to buy their home at the expense of every other taxpayer. Even if they did use the proceeds to build a new home for every home sold (which they so clearly do NOT) what justification is there for a select number of people to buy a house with £104,000 or £78,000 off the price? Unless everyone gets the same deal from their privately rented landlords how is it in any way fair to sell off housing stock at such a massive discount? If you can afford to pay for the house then that’s great, but if you cannot then why give a privileged few a deal like this? This is not aspirational this is criminal misuse of the taxpayers funds.

  2. Simon Stedman 8th June 2015 at 3:59 pm

    I agree, the policy is the most blatant vote-purchasing scheme in a generation

  3. Philip Milton 8th June 2015 at 6:59 pm

    Please differentiate between commercial property and residential property. At the moment the two are perhaps the most polarised they have been.

    For my thoughts on over-priced residential property enjoy:-


Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm