Property shares jumped today after a major investment bank said it expected prices to rise sharply in the first half of 2008.
In a note entitled ‘UK property shares – it’s so bad, it’s good’, Martin Allen, property analyst at Morgan Stanley, changed his outlook on the sector from ‘cautious’ to ‘attractive’, saying that he expected property shares to undergo a ‘short, sharp counter-trend rally’.
Short sharp rise
‘We expect UK property shares to rally by at least 20% in the first half of 2008 as the Bank of England is forced to cut UK base rates by around 100 basis points in an attempt to avert a recession,’ Allen said.
Not out of the woods
In the longer term however Allen, one of the most consistently bearish UK property analysts, painted a bleaker picture.
‘We anticipate that once this counter-trend rally has run its course, say in mid-2008, UK property shares could approximately halve in value over the following 18 months as an economic recession drags down market rents and precipitates the insolvency of many highly leveraged investors.’