Is this the time for private investors to buy back into listed property?

Private wealth managers are concerned that despite property companies fighting hard to shore up stretched balance sheets, share prices could slump again due to falling house prices and on-going debt problems.

The sector has seen a considerable number of rights issues and share prices have risen but some are worried the market is being far too optimistic.

Charles MacKinnon, Thurleigh Investment Management’s chief investment officer believes listed property stocks are dangerous for private investors right now. He believes the peak in bad debt lending among these companies can be pinpointed to three years ago, which means many will have to refinance all their loans in the next three months.

He said: ‘Loans are coming up for renewal and most are deeply underwater. A lot of people who still have property on their books are going to be searching around and I think the next six months is going to be the period of maximum turmoil in the sector.

‘If you look at the companies raising new capital, London & Stamford for example, it’s mainly because they want cash to buy up distressed assets. I think there are going to be very clear winners and losers here, making it very dangerous ground for private investors.’

MacKinnon said he does have some exposure to the sector through London and Stamford although he pointed out that it is not on a particularly big yield, at 3%, and he likes it more for its potential for capital growth.

Marcus Brookes, Cazenove’s head of multi-manager, agrees that now is not the right time to go back into the sector but said he was keeping a watchful eye on events over the next few months.

He said: ‘Listed property is very cheap but the main fundamentals are not there yet. We are not moving back into property at the moment, which may mean missing the first 10% to 20% return on day one, but it is so cheap that it is worth waiting.

‘When the time comes there will be lots of upside. Now is not the right time but it is one to watch.’

Tina Cooks, property analyst at Charles Stanley, said the group has most listed property stocks on hold at present. However, she said she does not think the optimism of the markets is necessarily incorrect as a number of buying opportunities should arise in the next few months.