Shares in listed property companies spiked today, dragged higher by improved confidence over the health of the financial sector.
The FTSE/EPRA/NAREIT UK index of property shares rose 9% today. Of the FTSE 100 listed stocks, Liberty International saw the biggest gains, rising 11.3% to 1,004p. Land Securities rose 10% to 1,339p, Hammerson 9.4% to 1,028p and British Land 7.3% to 780p.
The share rises were influenced by news that the US Treasury and Federal Reserve are close to creating a giant state-sponsored vehicle to take illiquid assets from banks’ balance sheets, in order to increase confidence in the financial markets. Property, with its reliance on debt, should be a beneficiary of anything which eases the pressure on banks.
UK financial stocks were also influenced by new regulation from the Financial Services Authority prohibiting the short-selling of shares. This legislation does not affect property stocks, but should improve the short-term climate for banks.
Despite the upturn in property share performance, analysts sounded a note of warning.
‘We remind investors that no price is too high for a bull or too low for a bear, but in our view one should never lose sight of the fundamentals,’ Harm Meijer, property analyst at JP Morgan, said.
‘We estimate current share price moves imply 0% upside for the sector on a 1 year view, indicating that they are 13% too expensive currently. We are back at the levels seen before the weekend, before the Lehman, Merrill and other troubles. We stick to our fundamental view and if anything, this week's developments could see downside risk to our targets.’