Prudential chairman and president of the Investment Property Forum David Clementi said the UK property investment market would grow over the next two years but warned that the five year forecasts were ‘sobering’.
Clementi told the IPF annual lunch today that the IPF’s consensus forecasts predicted total returns would fall to 7.7% for 2007 and 4.8% for 2008. He added that the Prudential’s own forecasts sat a little below these averages.
He said: ‘These forecasts imply, first, that yields will begin to move back out, at an accelerating pace, over the next two years and, second, that there may even be a small amount of capital decline in 2008, although naturally some specialised markets may do a great deal better than this. The five year forecasts are also sobering.’
Clementi added that the Prudential backed the belief that, in the short term, there would be better rental growth prospects and the office market - especially in central London - looked likely to be the best performing sector, with retail facing a tougher time ahead.