Investor appetite for property asset class defies downbeat view of economic woes

Thirty-two percent of advisors expect an improvement compared with 27 per cent in February. Although fund managers are less pessimistic compared to the previous survey, they remain the most negative group with forty two per cent expecting their portfolio performance will decrease, as opposed to a fifth (20 per cent) that foresee an improvement. Despite being down on the previous quarter, medium to large businesses in London and the regions remain positive about their portfolio performance, with 31 per cent and 24 per cent respectively predicting an improvement.

Property value uplift expected across the board
Whilst all groups other than small businesses have a less negative view of the value of their holdings in the next three to six months, only medium to large businesses in London and major businesses currently have a net expectation of increases. However, the overall trend is more optimistic than in February. Medium to large advisors, fund managers and medium to large firms in London display the biggest positive shifts, with 19 per cent, 18 per cent and 32 per cent respectively now expecting values to improve, compared with 15 per cent, 12 per cent and 24 percent respectively in the previous quarter.

Residential lettings tipped as best performer
As has largely been the case since it was first introduced to the survey in August 2011, residential letting is tipped to be the best performing sector by all groups surveyed. For the majority of respondents, house building is predicted as the second best performer with the exception of a fifth (20 per cent) of fund managers who foresee industrial as the next best performer behind residential lettings. This quarter highlights an increasing hope for out of town retail; the average share of respondents in favour of this sector has risen from 10 per cent to 17 per cent, whilst optimism about high street retail development has fallen from seven per cent to four per cent compared to the previous survey.

Impact of the TMT sector
This quarter, respondents were asked for their views on the TMT (technology, media and telecommunications) sector and what influence they perceive this to be having on UK property market activity. All groups surveyed believe that activity in the TMT sector is having a positive impact. Fund managers are the most positive with 46 per cent, followed by medium to large advisors at 42 per cent and London businesses at 40 per cent.

Lynda Shillaw said:
“We’re certainly seeing the establishment of TMT hotspots, although their impact at this stage is not strong enough to ‘move the dial’ and drive significant property investment in these locations. However, TMT’s influence is positive for the sector as the cluster effect creates momentum in that area and acts as a draw for other companies that can feed off their talent and innovation.”

Investment intentions point to short-term buying spree
Investment intentions continue to steadily increase in most sectors, with 65 per cent of major businesses looking to increase commitment over the next three to six months, followed by fund managers, of whom 58 per cent are looking to invest more into the property market. Compared with the last quarter’s survey, all groups showed greater appetite for new investment, with the exception of medium to large businesses in London and principals, whose investment intentions dipped slightly but remained positive on balance.