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Credit Suisse issues property outlook

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Written by:
12/02/2008

The UK Real Estate team at Credit Suisse Asset Management is predicting a short, sharp correction in the UK property market.

The three to five year picture for UK property is one of value when judged against the stable income stream, diversification benefits of the asset class (particularly in such volatile equity markets) and most notably the opportunity through Credit suisse’s coverage of the market to buy from distressed sellers at prices that reflect substantial upside.

These distressed sellers are likely to materialise from the numerous retail investor funds that have grown rapidly since 2004. Their cash positions have deteriorated over the past quarter and will likely continue to do so through the first half of 2008. A selective buying programme in an opportunistic manner of good stock in prime locations with asset management potential will provide strong returns over the medium term.

Credit Suisee has seen a steep decline in UK commercial property values resulting from an over-heated investment market, magnified by the subsequent credit crunch and a
wave of forced sales from some property funds resulting in IPD All Property Total
Return falling 8.5% over the past three months.

This is likely to continue through the first half of 2008, after which Credit Suisse believes that falling interest rates, a relaxing of the credit crunch and the sustainable fundamentals of real estate, associated with a cooling but still growing economy, will offer good upside.

 

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