Buy-to-let to dominate dinner party conversations in 2005

PrimePitch/Property Week survey finds buy-to-let is still popular. Sinead Cruise reports.

Private Investors have withdrawn from the residential sector in droves this year, but they still believe the buy-to-let market will be the main talking point in 2005, says the latest quarterly survey by Property Week and Propex's online investor forum PrimePitch.

Instead of comparing triumphs in capital growth and debating which areas of the UK will provide the best long-term returns, the findings suggest the UK's league of residential landlords will be absorbed in damage limitation for most of the year, until capital and rental values regain upward momentum.

The PrimePitch poll reveals that 8% of investors believe the buy-to-let phenomenon will be the hot topic of 2005, while nearly a quarter of those surveyed believe the campaign for REITs will occupy them the most.

James Tanner, head of property consultancy at PrimePitch, said: 'The investors were very downbeat when asked about the outlook for residential: 80% thought the sector would provide the lowest returns of all property classes, and only 3% said returns would rise this year.'

In comparison, confidence among commercial property investors looks to be at an all-time high.

Of those surveyed, 70% said they were looking to increase exposure to commercial property in 2005, representing a 5% increase on 2004.

But while the appetite to buy is strong, the motivation to sell is weak, and none reported an intention to sell commercial assets this year.

Tanner added: 'Investors who have been successful in buying commercial property have shown little wish to rid themselves of it this year: 88% described themselves as medium to long-term investors. While it's true that property investors are less nervous about sitting on their investments, the reluctance to sell is bourne out by the fact that stocks are still seen as a volatile, high risk option.'

The same attitudes are reflected in investors' desire to see more opportunities to add to their portfolio.

Two-thirds want better access to deals, while only 15% feel they are briefed on a sufficient number. Almost 25% say they feel the market provides poor advice to smaller investors - an 8% rise over six months.

Tanner said: 'Towards the end of the year, the markets were so strong that agents could sell properties quickly and easily among a trusted circle of clients, without having to go far and wide. My impression is that there is a sense of frustration among private investors because they are not quite sure how to see the deals. This is doubly significant for those yet to break into the sector.'

Of all those questioned, 58% believe that commercial property will provide stronger returns than equities over the next 12 months.

Investors believe returns will grow across every commercial sector this year. Almost half believe that the next six months will be strong for industrial, compared with 36% in August 2004 .

Tanner said: 'Investors are showing faith in the potential rising returns. There is a feeling that rental values in both the office and industrial sectors are due an increase and the popularity of retail property is as strong as ever.'

The numbers of investors who say they will buy and sell at auction remain steady - 90% said they will sell at auction and two-thirds said the will buy.