The Investment Property Forum (IPF) has revealed how real estate fund managers across the board have revised down their short-term expectations for the market.
Regular contributors to the regular consensus forecast 鈥� including the likes of Global Investors, Investment Managers, Real Estate and Legal & General 鈥� have universally cut their forecasts as a direct result of the UK vote to leave the European Union.
All 23 parties who gave their views on the whole of the UK market, said their expectations for rental growth and capital value growth were lower than they were prior to the referendum on June 23. In May, the to gauge sentiment in the run-up to the vote.
鈥淎 correction in prices is perfectly rational鈥�, said one respondent. 鈥淲eaker growth, even if still positive, suggests rising yields,鈥� said another.
Separately, Capital Economics, which has been than some commentators, warned of the risk of market 鈥渢alking itself into a correction鈥�.
鈥淥ur central view is that the outlook for commercial property is healthier than the recent gloomy headlines would suggest,鈥� the company said in a note.
鈥淣evertheless, there is a latent risk that negative sentiment itself could become self-fulfilling. If this is the case, then a flurry of fire sales or wholesale devaluation of assets, could throw our forecasts off course.鈥�
Investment Management the negative effect of Brexit is likely to be short-lived and less severe than some have been fearing.
Pam Craddock, IPF research director, also pointed out that some of the IPF contributors are 鈥渇orecasting a better outcome than their pre-Brexit figures in certain sectors within the next three to five years鈥�.
The longer the time horizon, the less consensus there is among investors, the survey found. Brexit has not affected the majority of managers鈥� long-term expectations (73% for rental growth and 68% for capital growth).
Speaking separately to IPE Real Estate, James Lass, fund manager at , said the market had already seen deals take place at 10% discounts.
But he said such cases were limited to investors that needed to sell in a matter of days. Other investors, not under pressure to sell, could achieve better pricing.
Lass, fund manager for the 拢2.2bn UK Real Estate Fund (SREF), said there was now a 鈥渢wo-speed market鈥� in the UK.
A number of open-ended property funds have been compelled to sell assets in the face of redemptions from investors 鈥� most notably, Aberdeen Asset Management鈥檚 for 拢124m to the Norway鈥檚 sovereign wealth fund.
There is a fear that an increase in forced sales could bring capital values down more widely, but there are signs 鈥� including the in Aberdeen鈥檚 fund 鈥� that the situation regarding the UK鈥檚 open-ended funds could be stabilising.
Capital Economics said: 鈥淎ssuming that we are right about the economy, and that a fire sale is looking unlikely, the biggest risk to capital values seems to be the perception that values would suffer in response to Brexit.鈥�
