Premier’s Alex Ross believes targeting areas of the property market that are expected to show rental growth will be key this year.
The £49m Pan European Property Share fund manager says although capital values are rising, yields are likely to be flat for a number of years.
“Rental market outlooks will now be absolutely key in the sustainability and strength of the recovery in property values, with values set to be solely driven by the movement in rental values from the second half of this year and thereafter for a number of years,” he says.
“It is certainly my belief we are in the middle of a short and sharp recovery in primary UK capital values, driven by the attraction of sustainable income from well-let properties,” he says.
“But after, we are likely to see a broadly flat yield for a number of years as banks go through a two- to five-year deleveraging phase.
“Significant areas of recovery will be from areas of the market likely to see rental growth.”
Ross favours central London office space, believing rental values have reached their lowest point and supply is minimal.
More generally, he prefers office space to retail assets.
The Pan European Property Share fund has returned 39.1% over 12 months to 15 February, compared to an IMA Property sector average of 20.3%.
