Legal & General (L&G) expects total returns on property to turn positive again in the second half of 2008.

Rob Martin, head of performance analysis and research at L&G Property, said: “The case for investing in property remains a strong one. It has always been an excellent asset to include in a portfolio due to its low correlation with equities and bonds and its income-generating capacity.”

In recent years as investors have switched away from equities and bonds into property, total returns have been excellent. Clearly in the second half of 2007 and the start of 2008 there has been a sharp correction in capital values.

L&G believes this process has already resulted in value appearing within the UK property market witnessed by the activity of so-called ‘opportunity funds’. As the year progresses and the fundamental attractiveness of the asset class re-asserts itself, L&G expects institutional and overseas funds to increase their activity.