Investors urged to snap up property

Telegraph logoA report in today’s Telegraph newspaper suggests now is the time to invest in property.

The report states that according to a growing number of professional investors, among them Henderson’s multi-asset manager James de Bunsen, who is a believer in bricks and mortar for the first time, now is the time to invest in bricks and mortar.

“It’s a valuation story – if you look at the cost compared to the income you can get, property looks compelling,” he said. “Property funds are yielding 4.5pc, compared to gilts at around 2pc and corporate bonds at not much higher.”

Mr de Bunsen said property also added diversification, and while he would never hold more than 4pc of a portfolio in property, having an alternative source of steady income was invaluable.

Trevor Greetham, portfolio manager of Fidelity’s multi-asset funds, is also keen.

“Property’s income is attractive, borrowing costs are falling and exposure is primarily to economies in the US and Asia, where credit is flowing freely,” he said.

Property investments also offer some protection from inflation. As anyone who has been a tenant knows, rent does not stay the same year after year – it tends to rise in line with other price increases. It is the same for commercial property.

Many investors are concerned that the Government’s attempt to kick-start growth through quantitative easing will create greater future inflation. The trick is to find assets that grow in value enough to offset this or pay income that exceeds inflation.

According to George Shaw, manager of the Ignis Property fund, commercial property is attractive because of the high and stable income it pays. Between 2001 and 2012, for example, income accounted for 6.2pc of the 6.4pc annual return.

Mr Shaw forecast a total return of around 6pc for 2013 and 7.2pc a year for the next three years – with commercial property demonstrating less volatility than shares, cash and bonds.

The report continues: The London market keeps rising with the arrival of more foreign buyers, but better income yields can be found elsewhere. A combination of low property prices and a strong local rental market – often driven by student demand – means that Southampton, Blackpool, Slough, Coventry and Portsmouth provide some of the best rental yields in the country.

See the full Telegraph report here.


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