Number of financial advisors expecting Commercial Property price falls quadruples

Published 12th Aug 2010

The number of financial advisers expecting commercial property prices to fall has quadrupled since the start of the year, research from Reita has shown.

According to the research carried out last month, 24% of the 269 independent financial advisers (IFAs) surveyed said they believe prices will fall. The research was carried out by Reita, the quoted property and REIT awareness campaign said.

The figure compares with just 6% who believed prices would fall in January this year.

Belief that commercial property prices would rise also faltered, with 73% of IFAs predicting rises in January and only 49% feeling the same in July.

Reita chairman Patrick Sumner said: “The growing concerns among advisers reflect justifiable uncertainty about the economy over the next year or two, mainly in the light of public sector cuts.

“Recent news of falling house prices exacerbates these concerns, but there are big regional and sectoral differences. The preponderance among the leading UK REITs of central London and high quality retail property sets them somewhat apart, as do their relatively strong balance sheets and access to financial markets.

“We are in the early stages of a slow economic and commercial property market recovery, in the course of which there will be the odd lurch, but shares, in my view, are trading at the cheaper end of fair value, and dividends are sustainable.”

Almost half of the respondent said investors should be interested in REITs and funds that invest in REITs.One third of respondents said investors should not be interested.

However, only one third of advisers questioned felt confident in giving advice on the risks and opportunities of the different commercial property sub-sectors.

Peter Cosmetatos, Reita’s programme director, said: “The commercial property market remains quite polarised, with prime property having recovered strongly over the last 12 months but secondary and tertiary property generally remaining very weak, with low transaction volumes – so it isn’t surprising to see a range of expectations about what values will do.

“The view in favour of investment in REITs makes sense, for example, because the UK’s REITs tend to be focused on the better quality end of the property market, where prices now seem to be stabilising.”

Source: ' Property Week '

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