ING sees greater uncertainty in UK commercial property
LONDON (Reuters) - The UK arm of ING Real Estate sees greater uncertainty in the UK commercial property market, with concerns over economic stimulus and austerity measures making short-term investment decisions difficult.
"Market pricing is being heavily distorted by artificial stimulus so it is unlikely we will get away without more volatility," said Ian Whittock, chief investment officer of ING Real Estate Investment Management UK, said on Tuesday.
"There is a disproportionate amount of political risk at the moment both domestically and international, for example the issue of quantitative easing," he said at a seminar.
Economists polled by Reuters this week were divided on whether the Bank of England will follow the United States' lead and inject more cash into the money supply through quantitative easing to boost the economy.
UK commercial property value growth eased further in October, fuelling fears the market will see a double dip in prices, with economic growth remaining languid.
"If QE comes in next year, all bets are off and it is likely that values will continue to rise, but that's something that is almost impossible to anticipate," Whittock said.
Highlighting the level of doubt on the economy, an informal survey found views of the 100 property investors at the seminar, held in a central London hotel, were spilt on whether the UK faced greater danger from either inflation or deflation.
Another area of concern was the negative impact of the UK government's recent austerity measures, and continued weakness among tenants, such as the fragile banking sector, said Gary Moore, head of acquisitions at ING REIM UK.
UK developers such as Land Securities (LAND.L) and Hammerson (HMSO.L) have unveiled plans for new office projects in London, even as modest financial results and threat of break-up forces some banks to rethink their property needs.
Despite the current volatility, ING REIM predicts UK commercial property can provide annualised total returns -- comprising income and capital growth -- of 9.5 percent in the period 2011-2015.
"UK property still provides a good return and we are encouraging investors to look at the sector for the longer term," Kevin Aitchison, ING REIM UK's CEO, told Reuters on the sidelines of the seminar.
(Reporting by Daryl Loo; Editing by Andrew Macdonald) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)
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