PropertyFeb 4 2013

US housing recovery called into question by M&G

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M&G’s Global Real Estate Securities fund manager has questioned the wisdom behind equity investors attempting to buy into a US housing market recovery.

Gillian Tiltman, who has run the £80.2m fund since June 2010, said that the US housing market would pick up as part of a cyclical recovery, but warned against hope of a “structural recovery”.

The manager said that home ownership had swelled to roughly 68 per cent in the US before the financial crisis due to the easy availability of mortgages. It had since fallen to approximately 60 per cent, but Ms Tiltman said the eight percentage-point drop was largely down to a “segment of the market that isn’t real”.

“Managers talk about a recovery, but of those people who left the housing market [during the crisis] many are not coming back because they shouldn’t have been there in the first place,” she added.

“The American dream of owning a house has become harder.”

Ms Tiltman’s favoured US investments include “community” housing companies which offer affordable rented apartments. In some cases they allow tenants to become shareholders.

The manager said she was retaining a cautious approach to China, but had opened positions in two Chinese property developers, Greentown China and CC Land. Following a trip to Beijing in January the manager said she was confident valuations for the two firms still appeared cheap.

Ms Tiltman said: “These stocks are specific change stories. I’ve not been a proponent of Chinese companies [but] valuations got too low and these companies came up.”

The M&G Global Real Estate Securities fund outperformed the majority of its IMA Property sector peers in the three years to January 29, returning 55.3 per cent compared with the sector’s 27 per cent average gain.