PropertyJul 17 2014

Real estate sell-off ‘good for income’

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The Brewin Dolphin equity analyst said there is still “sufficient headroom in the yield gap between real estate and gilts to provide protection against a rise in base rates”.

Writing in a nine-page research note, Mr Williams argued that UK real estate offered five key attractions: good yields; a built-in inflation hedge; a safe haven from emerging market concerns; positive growth expectations for companies in the sector; and undemanding share ratings.

Mr Williams said: “We remain positive on the real estate sector, with UK GDP set to grow by around 3 per cent in 2015 and Capital Economics expecting a total return of 12 per cent in 2015 and between 9 and 10 per cent from 2016 to 2018.

“Further yield compression is anticipated and capital growth of 6 per cent is expected in 2015, with the economic recovery based on increasingly solid foundations.”

Mr Williams revealed that Brewin Dolphin is overweight real estate companies. He rated British Land, Hammerson and Segro as buys.