BY phil craig
Record
low yields in the
Investment
Property Databank (IPD) statistics show initial yields from
Concerns
about prospects for property markets led intermediary AWD Chase de Vere
to
highlight the risks of short-term property investments.
In
a statement last week about the Keydata Property Income Bond, which
promises
income of 7% per year over a six-year term based on investments in US
residential properties, research manager Justine Frears said property
returns
are under pressure. She added the Keydata product may struggle to fund
suitable
investments in a reasonable time period.
In
response, Keydata's sales director Mark Owen said the product was
pre-seeded
with £10m of residential property.
This
comes as Cofunds reveals its top 20 sellers include Norwich Property,
New Star
Property, M&G Property, Standard Life Investments Select
Property and Swip
Property. The New Star, Norwich Union, Standard Life and Swip funds
also
feature in FundsNetwork's year-to-date top 10.
While
retail investors are clearly still piling into property, institutional
property
investment specialist Andrew Hynard, of Jones Lang LaSalle, said the
asset
class has already seen its best returns for this point in the cycle.
"Total
returns are unlikely to match what they achieved last year," he said,
explaining there is more demand to buy than investment stock on the
market.
Hynard
added the retail appetite for property is a result of good returns in
recent
years.
"The
retail money is coming in a bit late in the cycle," he said.
"However, there are diverse sources of demand, with interest from the
Middle East and
Martin
Brookes, manager of Prudential's £69bn Life fund, said
property returns have
been far above normal over the past 10 years.
"We
concur the
Ian
Hally, head of property research at Swip, said while average total
returns for
the past five years stood at around 12%, the average yield over the
next five
years will fall to around 6%.
"If
investors think they will get another five years of double-digit
performance,
they will be disappointed," he said.
Janet
Leasom, property product specialist at Morley Fund Management, which
manages
the £3.1bn Norwich Property Trust, believes returns on
property are still
supporting investors in the asset class. That said, she also stressed
the
double-digit returns of recent years may not continue.