Standard Life Investments says it’s cautious about large parts of the UK property market but has remained positive about the prospects of the office sector.
Alex Watt, managing director of property investment at Standard Life Investments, says the last few months of 2006 heralded a turning point in the UK property market, with property income yields hitting the same levels as gilts following four years of strong double-digit returns.
He says there were some signs that the period of yield concentration had run its course and that several areas of the market now look expensive.
However, he adds: It must be pointed out though that UK property valuations are by no means uniformly worrying. On the same calculation basis, other areas of the UK market remain attractive.
In central London investors can expect to pay a similar level of yield for prime best quality office buildings. Here, the strength of projected double-digit rental growth suggests continued attractive returns for investors.