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LGIM bullish on property

Investing in property will deliver strong returns in 1998, according to Legal & General Investment Management.

LGIM forecasts that returns on property should hit around 16 per cent this year.

Managing director (property) Stuart Beavor claims that rental income grew by 5.6 per cent last year compared with just 1 per cent in 1996.

He says: "Our forecast is that rents will grow by 7 per cent this year and, while yields are high, they fell last year and will again fall this year.

"Anything that is a property vehicle will do quite well and property has a lot of good performance to come. The stockmarket tends to predict things early and property companies are doing very well at the moment."

LGIM prefers industrial and retail property to offices and, like many commentators, forecasts that the South of England will outperform the North.

Beavor believes that this will create strong growth for retail investors in property unit trusts and other property investment vehicles. But he warns that capital growth is likely to weaken over the next five years, reducing overall returns until 2001.

LGIM believes that the total return on property will average about 11 per cent a year over the next five years, or 7-8 per cent a year in real terms.

Beavor says: "What retail investors should remember is that property is a long-term investment."

He says property can be seen as an alternative to bonds, producing better returns.

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