Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Is regional property finally a screaming buy?

Is regional property finally a screaming buy?

With more than half of wealth managers still underweight property, it seems investors are struggling to forget the sector’s 45% crash between 2007 and 2009.

Even those brave enough to dip their toes back into bricks and mortar are rarely seen venturing out of London, but with safe haven, international investors pushing up prices and compressing yields, assets in the capital are expensive.

What's more,  figures from IPD show the gap between prices in London and the rest of the UK has spread to an all-time high, and over the last four years it has widened by  35%.

Such a dramatic spread means the polarisation in property prices is now at an unprecedented level, IPD said, and while it undoubtedly cements in investors' minds the resilience of the London market, it also leaves them wondering at what point do the regions become a screaming buy? 

Ignis UK Property manager George Shaw continues to be cautions on assets out of the capital and believes that despite the huge gulf, investors must choose their properties carefully.

'The gap reflects the different dynamics - London and the South East are stronger economically,' Shaw explained.

'We think there are opportunities in regions, but these are micro, or asset specific. The yield gap is there for a reason,' he added.

Agreeing, Henderson's Ainslie McLennan, who runs the asset manager's UK Property Unit Trust, warned that while the regions had been 'good to her', with assets in Manchester performing well because of the city's diverse business base, the bulk of economies outside of London are far weaker than those in and around the capital, and this gloomier backdrop has kept her picky.

These views are backed up by a Capital Economics analysis of the health of the UK's regions, which showed that between 2006 and 2012 London appeared to be the only centre in Britain that experienced a real rise in consumer spending.

The impact of this is that employment, pay and growth prospects are all far rosier inside of the capital, and while consumer spending is forecast to rise in real terms by 1.5% a year through to 2016, the likes of England's North East, the West Midlands and Yorkshire are all in for continued declines.

To McLennan (pictured), who over the last three years has outperformed her typical UK physical property peer 14.1% versus 11.6%, this means investors are unlikely to alter their views on property investment out with the capital, and thinks it unlikely she will add to her £807 million fund's regional exposure.

McLennan said: 'London just has more economic strength...I am quite cautious about taking on more regional offices.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Navigating geopolitical risk with ETFs

Navigating geopolitical risk with ETFs

ETFGI’s Deborah Fuhr on how investors can use exchange-traded funds to position their portfolio.

Play Sarasin’s Boucher: why I like salmon with chocolate

Sarasin’s Boucher: why I like salmon with chocolate

Henry Boucher, manager of the £129 million Sarasin Food & Agriculture Opportunities fund, explains why he is gobbling up salmon and chocolate stocks.

Play Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Libby Ashby and leading wealth managers analyse what the Alibaba IPO hype means for Chinese equities, slowing growth of the UK economy and whether there’s anything left to play for in the European sovereign bond market.

Wealth Manager on Twitter