View more on these topics

Reit generation

The introduction of Reits next year comes as investors seek diversification away from equities and gilts.

The specialist sector remained the most popular net retail sector in October with inflows of £519m, of which £379m was invested in property funds within the sector. These are still positive times for the property market and 2007 is set to be another strong year as investor appeal continues.

We expect the economic backdrop will remain favourable to property. Recent high returns were derived from a belated property repricing for a lower inflation environment and, with economic growth expected to run at or above the current trend over the next few years, there will continue to be positive implications for rental growth.

In recent years, much of the market’s performance has been through yield compression but this will not continue indefinitely. As this weakens, income growth will play an increasingly important role in delivering strong returns.

Even though property yields are at a record low, we anticipate further decline as domestic and overseas investors seek a home for their allocations to the sector.

Investor demand for property assets shows little sign of weakening and tenant demand, particularly in the office sector, is improving. Stock selection and proactive management of portfolios will be crucial in delivering performance. The office sector has been this year’s top performer and we predict Central London offices to again be top of the list, followed by industrial, with retail bringing up the rear after a long run at the top.

Rental growth in Central London is well above trend and rising. The South-east is also set to fare well but later in the cycle and very centre-specific.

Industrials’ steady yearon-year performance has delivered good long-term returns and the prospects continue to look solid. The segmented retail market will offer opportunities, particularly in open A1 retail warehouses and secondary shopping centres where there is opportunity to actively manage and create value.

The outlook continues to be strong but investors will inevitably need to adjust to lower return expectations. Our forecast for 2007 is an 11 per cent total return and an average of 8.9 per cent over the next three years.

This year, strong total returns have been delivered in a period of below-trend rental growth and much of the performance has come from yield compression. We anticipate rental growth to be more accretive to returns.

Any outlook for 2007 cannot fail to mention the introduction of real estate investment trusts. The UK is one of the world’s biggest real estate markets, yet we have not had the regulatory framework to enable investing in an onshore public listed vehicle. Investors and advisers will welcome a vehicle which provides liquidity to an asset class which has historically been considered inflexible.

With a backdrop of continued low interest rates, increased investor allocation to real estate as an established asset class and growing requirements for investors to seek diversification away from equities and gilts, Reits are arriving at a good time.

From experience in the US and Australia, where the Reit market is huge, we believe there will be a spike of initial interest and then a gradual increase in use as more firms convert to Reit status. These trusts, some of which will be segmented by property type, will enable investors to have a much wider choice in their property investment.

Elliot Caldwell is head of retail investor products at ING Real Estate


Advice is winner as Lifesearch set for Asda deal

Lifesearch is close to winning the contract to sell life insurance through Asda after going head to head with Hargreaves Lansdown and Norwich Union in a three-month bidding war.Hargreaves Lansdown pulled out of the race last week and Norwich Union is understood to have lost the bid to Lifesearch, which will be selling life insurance […]

Political parties must pay if their policies fail

If people in hospitals washed their hands as often as this Government, there would be no MRSA crisis, I am sure. As we saw in James Salmon’s article last week, the Government is now saying that the 125,000 pensioners who lost their pensions should have taken advice (presumably to transfer out of their doomed scheme). […]

Vintage year for wine investment

Fine wine investment group Premier Cru has seen business from advisers increase fivefold since A-Day and intermediary sales now make up half of its inflows.Much of the interest has come from Sipp investors despite the Treasury removing tax relief on wine in pensions.Sales director Gavin Saffer says he expects adviser-based inflows to increase as they […]

Sing for your supper

I have been reflecting on my letter in your November 30 edition and Nic Cicutti’s thought-provoking piece in your December 7 edition. It strikes me that there is plenty of scope for financial advisers to receive payments that are disproportionate to the amount of work they do for their clients by way of fund-based renewal […]

Time to stop the salami slicing on tax relief

Steve Webb  – Director of Policy and External Communications As the Autumn Statement approaches, Steve Webb calls for the Government to stop tinkering with tax relief. Twice a year, in the run-up to the Spring Budget and the Autumn Statement, we face a torrent of speculation as to what changes the Chancellor might make to […]


News and expert analysis straight to your inbox

Sign up


    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