Property share guru Chris Turner predicted this week that most of the quoted property sector pain had already taken place but that the ‘point of maximum pessimism’ had still to be reached.

As he revealed poor half-year results from TR Property Investment Trust (TRPIT), which he manages, Turner said: ‘What we can say is that, short of Armageddon, we have seen the worst of the share price falls in the well run well financed property companies. I think that the point of maximum pessimism is still to be reached.

‘An event may mark that point, but what event I cannot tell. That event could conceivably occur anytime now or it may still be twelve months away.

Hatches battened down

'So we wait with our hatches battened down - staying in town as an investor dedicated to property - trying not to be too brave or too pessimistic. We will search for opportunities in others' distress and look forward to the day when we can report a return to decent growth.’

Turner also said the current property share price woe was not as bad as the two earlier plunges in his career: ‘The two really dreadful property share markets in my lifetime have been 1973-75 and 1989-92. Both came against the background of sky high interest rates, large scale overdevelopment and a sharp rise in unemployment which drove down rental values.

‘We do not have overdevelopment today, no-one is forecasts sky high interest rates or a doubling of unemployment.

No easy answer

So the fall in property values is a pricing issue. So what are property share prices discounting? This is easier to ask than to answer.

‘We have to start from what we think "normal" pricing should be within a REIT regime. Let's assume around a 5% discount.

'If the discount is currently 35% then, simplistically, the share price is assuming a 30% decline in the NAV.

'Adjusting for leverage that will mean a 15% to 25% decline in the value of the properties.’

Poor six months

TRPIT, whose major investments are shares in property companies, not surprisingly, had a poor six months to 30 September.

Its net asset value fell by 19.6% to 234p a share, which was slightly better than the 20.7% fall in quoted property shares.