Reuters- Now is the wrong time to be looking at investing in UK commercial property, while returns from some hedge funds are set to disappoint, Jupiter Asset Management Chief Executive Edward BonhamCarter told Reuters.
Speaking on Thursday on the sidelines of the Fund Forum 2007 in Monaco, Bonham Carter said UK property yields — the rental income relative to capital value — were no longer attractive relative to the cost of borrowing.
“There is a case for international property, but I think it is the wrong time in the asset cycle to be looking at UK property,” he said.
“Base rates are above rental yields, and when that happens returns tend not to be that attractive.”
His comments come as the Bank of England raised interest rates by a quarter percentage point on Thursday to a six-year high of 5.75 percent — the fifth increase since last August. Markets are pricing in further rises in borrowing costs.
According to index compiler Investment Property Databank, UK commercial property has returned 18-19 percent in the past two years. However, last week Morley Fund Management, one of Europe’s biggest property fund managers, said investors have already seen the best of capital returns from this market.
