Chris Morrogh, fund manager at Threadneedle, has warned that property prices will fall in the next 12 to 18 months as banks look to sell off their assets to the market, but this presents opportunity to buy property at lower valuations.
Speaking at the Cofunds Economic forum in London last week, Morrogh, who manages the £393m Threadneedle UK Property trust, says that banks have £157 billion of UK property loans that are due to mature in 2012 and 2013.
He said: “Banks have a lot of property on their books and they want to reduce it. So there will be an amount of property being sold. We do not think it will be a tidal wave of property sold like in 2006, but it will dampen prices over the next year and a half.”
Morrogh said that despite prices falling it will create an opportunity to buy the properties from them at a good price and the property team will exploit this opportunity across the property funds.
While investors look to property for income, as well as potential capital appreciation, depressed rental values have been another factor impacting property fund returns.
Morrogh said: “I expect rental values in the UK to move in line with inflation when austerity measures pass. It is difficult to predict when, but as soon as there is a move towards normal economic growth, we expect it to happen.”