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Property could find a floor this year, says New Star’s Webster

New Star head of global property Stuart Webster believes this year could see property prices bottom out in those countries that are furthest through the downturn.

He says indebted investors are likely to struggle as banks continue to opt against financing property purchases but says those with financing should be able to buy assets at fair prices with distressed sellers putting property on the market.

He says: “The difference between financing costs have fallen significantly and yields have risen significantly so buyers prepared to take a medium-term view should be able to generate attractive returns. It is likely that 2009 will be the last year for some time in which buyers will be able to negotiate aggressively on price, with competition among buyers re-emerging in 2010.

“This suggests that capital values should begin to find a floor this year and this is particularly likely to be the case in markets that have been falling for a long time, such as London and Paris.”

Webster says the role of tenants is going to be crucial for the performance of direct property portfolios, pointing to competition for space diminishing this year, with areas such as the office sector suffering in particular due to mergers and consolidations leading to redundancies and reduced space requirements.

He says: “This means a considerable amount of grey space – surplus space that a tenant seeks to sublet – may come on to the market in 2009. This may increase vacancy rates and reduce rents in the main financial hubs of London, New York, Frankfurt, Hong Kong, Singapore and Tokyo. The correction may be cushioned, however, by the strong location preferences of the banks, which will want to be well positioned for when the financial cycle turns.”

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