Money is suddenly pouring back into property as the vicious decline finally runs out, researchers have revealed.
Malcolm Hunt, head of UKclient services at IPD, said the sector was seeing a turnaround “like a bat out of hell”.
But so far the figures show Birmingham is yet to benefit significantly.
Mr Hunt was delivering the IPD’s review of 2009 to members of the Investment Property Forum at a meeting hosted by Argent at Eleven Brindleyplace in Birmingham.
The highlight was the largest ever quarterly capital growth experienced in the final three months. It also revealed “record breaking positive yield contributions in the context of some of the worst rental declines”.
Mr Hunt said rent levels were still falling “but at a decelerating rate”.
A return to positive capital growth – a cumulative 9.8 per cent over the second half of 2009 – was sufficient to lift annual total returns to 3.4 per cent, inclusive of a final quarter 10 per cent.
Birmingham returns fared less well, even though they showed impressive resilience, with retail off 5.7 per cent, industrials down just 0.7 per cent and offices up 0.9 per cent.
However, after starvation rations, it is the rush of money back into property which has prompted concern.
Simon Robinson, vice-chairman of the IPF Midlands, said: “It is almost as if property investment has become detached from the real economy, and is instead driven exclusively by highly volatile shifts in capital flows which are immediately reflected in truly amazing yield reversals, flipping from the decade’s most damaging to most beneficial impact in a matter of months.”
Peter Damesick, UK head of research for CB Richard Ellis, took an optimistic view of the economy as a whole.
“Retailers are perpetually moaning but have had what might be described as quite a good recession,” he said.”
House prices were picking up, unemployment appeared to be levelling off, household spending was edging higher and there was a return to growth, with the Bank of England forecasting a 2.1 per cent rise in GDP this year and four per cent in 2011.
However, household debt levels in relation to income remained “very high”.
In terms of the outlook for commercial property, drivers of an investment market upturn would be yields; the lower pound attracting foreign buyers; a broad-based revival of interest in property; strong inflows to institutional funds; a rise in asset prices helped by quantitative easing; and excess demand for good quality assets.
Barclays, Lloyds, Royal Bank of Scotland, ING and Santanderwere now more active lenders along with German banks Eurohypo, Deutsche and Deka. However, lending terms and requirements were still “fairly restrictive”, with lending to value at around 60 per cent. Lending criteria were “conservative” and there was “no appetite for secondary”.
Loan sizes in excess of £50 million were still difficult. Syndication, though, was being considered again.
Mr Damesick questioned whether the upturn would be sustained.
Property investment transactions had bottomed out and were on the rise again – £9.6 billion in the last quarter of 2009, he said.