Aberdeen Property Investors sees continued value within the asset class despite the strong retu...
Aberdeen Property Investors sees continued value within the asset class despite the strong returns it has already generated over the past few years.
David Hunter, chief executive of the group, said this is the reason it is looking to launch a property fund aimed at the retail market. Aberdeen is forecasting returns of 10.3%pa over the next two-to-three years.
'In the 10 years to the end of May, statistics have shown that property was the top performing asset class,' said Hunter. 'The question to address is whether there is still value, and our view is that there is.'
Property yields have consistently been around the 8% mark for the last few years, and although there has not been much rental growth this year, prices are holding up quite strongly, according to Aberdeen.
Hunter has spotted an increasing trend by investors to use debt to fund their property purchases.
'The property market has been heavily debt driven and banks are still keen to lend to investors,' he added.
There has been an increase in interest in property investment from high net worth individuals, according to Hunter. He said: 'Companies are offering funds to retail investors on a highly leveraged basis. Retail investors are buying anything you can apply debt to. They are driven by the numbers on their spreadsheets.'
This has led Aberdeen to do some market testing with a view to launching a fund available to retail investors. The group is now focusing on issues such as how liquid a portfolio could be made and the type of risk investors are prepared to take.
'We believe investors want direct property returns, and liquidity is a price people should pay,' added Hunter. 'Property should be treated as a long-term investment.'
Institutional investors are increasingly looking at property investment, and are allocating more funds to the market, according to Aberdeen. It sees the big focus being on retail warehousing and industrial property. High street property has been less popular, although shopping centres are in demand at the moment for the big yields they offer, according to Hunter. He said investment in offices has continued to grow, despite property rentals dropping in places such as central London.
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