NO PROPERTY CRASH LOOMING, SAY PRIVATE INVESTORS

Property Week/PrimePitch suvey reveals strong investor confidence returning to property

By Sinead Cruise

Nine out of 10 private investors dismiss the possibility of a looming property crash. This is the key finding of the latest Property Week/PrimePitch Investor Survey.

The likelihood of a market slump was the obvious question to ask survey participants as the second quarter of 2004 closed with a 25 basis point interest rate rise - the fith increase since Novermber 2003.

While 90% of investors believe there will be no crash, two-thirds expect their exposure to the commercial property sector will grow in the next 3 months. Only 11% said they planned to reduce their property weighing in the next quarter.

For the first time, the survey asked investors to define their approach to property investment and the relationship between interest rates and their investment plans. Most respondents - 92% - said their strategies were either long - or medium-term and 51% said their plans to buy property were unaffected by the latest interest rate rises.

James Tanner, head of property consultancy at online investor forum PrimePitch, said: 'Investors appear to have recognised that the times where an investor could buy and sell an asset after three months and make a profit are over. Instead of focusing on increasing returns via capital growth, more investors are looking to the rental growth factor to add value.'

Commercial property has regained popularity over shares: 52% of those surveyed were confident property would provide better capital and income returns than equities in the next three months. In the last survey, conducted three months ago, 53% of property investors expected equities to offer better returns.

Private investor preference for retail and industrial property appears to have levelled off since the first quarter of the year, while offices are now more popular. Demand for retail property fell from 51% to 37% and for industrial from 55% to 36%.

Tanner said: 'The falling demand in these sectors, and the corresponding increase in demand for office property from 19% to 33%, represents a catch-up in values and a tendency among investors to be less sector-specific.'

He continued: 'Retail and industrial property up to now has been relatively undervalued and the market reacted to this by buying up all the retail assets it could. Demand for any type of commercial property has meant that investors wiill buy into most sectors if a deal can be found.