The company has released its quarterly ‘property investment perspective’, showing a marked increase in expectations of a UK recession and growing concerns that shorting is causing ‘unprecedented’ property market volatility.
The Reita Expert Panel, including representatives from 24 of the leading property and investment organisations, including some of the largest UK REITs, EPRA, NAREIT and the London Stock Exchange.
In the last quarterly study (May 2008), 54% of the Reita experts believed the UK was facing a short-term dip in economic performance, compared to 27% who believed we will see a recession. Almost half (48%) of the expert panel now expect a recession, with only 26% believing there will be a ‘short-term’ dip in performance.
Reita believes the tone of the recent Bank of England statement was notably more pessimistic than previous statements and, as the Reita exert panel results showed, the threat of recession has increased significantly.
However, at the same time the 5-year swap rate (the benchmark for property investors) fell sharply from a peak of 6.2% in June to around 5.3% (14 August), perhaps building in expectations of better conditions, or at least interest rate cuts ahead.
Patrick Sumner, chair of Reita, explained: “The property market is subject to the same hopes and fears as the general economy. It suffers when starved of capital, but it suffers more when it is seriously oversupplied with space, as it was in the early 1990s. That is not the major problem in this downturn. It is lack of investor and tenant activity that is really depressing the market. Both these factors can turn rapidly, but there may be some further squalls to weather first.”
