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Swip fears over commercial property funds

Commercial property fund sales could suffer as investors see commercial and residential property as linked, says an expert from Scottish Widows Investment Partnership.

Swip property research manager Stewart Cowe says his research shows that there is a correlation between the capital growth of commercial property funds and the capital growth of residential property. House prices rise when investors are confident about their own financial and economic outlook, and since this happens when the economy is doing well, this tends to coincide with the growth of commercial property funds. When confidence is falling, the reverse is true, says Cowe.

As residential property slows down, Cowe predicts a simultaneous slowing in the returns from commercial property and says investors are going to be more reluct-ant to put their money into any kind of property. Cowe says: “We still anticipate returns of 7.5 per cent over the next five years on commercial property but it still costs a lot of money to get into the market and we think it is starting to slow down.

“The bad news for advisers trying to sell commercial property is that the residential property market is flat at the moment and correlating that to commercial property shows it is not going to be great either.”

Jamieson Financial Management principal Bruce Jamieson says: “I tell my clients they are different and many of them still see commercial property as a smart investment.”

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