The UK economy returned to growth in Q3 2012, bringing (at least temporarily) an end to technical recession. While the outturn of 0.9% (QoQ) was at the top end of expectations, the outlook is less buoyant. Forecasts of UK GDP growth have been downgraded and a return to trend growth rates is unlikely to occur during our five year property forecast period. With worsening economic conditions across the Eurozone, the UK is likely to continue to face a tough export market. In terms of property, capital values have now fallen for 13 consecutive months as a result of weakness in both investment and occupier markets. However, property's income return remins stable and total returns in the region of 2-3% are expected for 2012. In both the listed sector and the direct market, investors continue to focus on Central London, which offers a good demand/supply balance, and secure, long-dated income streams. Secondary assets remain out of favour. As a result, the spread between prime and secondary pricing remains as wide as ever. 2013 is set to be another challenging year, with continued capital value falls expected. However, it should also be a year of opportunity, especially for equity investors with a bit of risk tolerance.
Source : CBRE Global Investors