Philip Gadsden, Orchard Street Investment Management and manager of the St. James’s Place Property Fund, believes that the property market is far from experiencing a crisis like the one it went through in 2009:
“For some investors, current volatility and uncertainty surrounding the property market brings painful reminders of the 2009 crisis. The good news is that the situation is far from similar, with two big differences.
“Firstly, the sector has not seen the level of development that took place prior to 2009, much of which was speculative, so there is not an overhang of space at present. Indeed in many markets around the country there’s very little good quality prime space available to let, whether you’re talking offices or industrial space. So it is the classic supply/demand equation: without too much supply and with reasonable demand, rents are likely to remain stable.
“A second key difference is that back in 2009 the global financial crisis was caused by debt, but at present there is not an over-leveraging position in the British property market. If we look at listed UK property companies, the amount of on-balance sheet debt that they have is at a very comfortable level, and they can withstand very significant shocks to their businesses and not have a debt issue.
“If investors have a single-digit or a small double-digit exposure to real estate within a mixed portfolio, that comprises a sensible diversified exposure to our sector. Property is an asset class which over the long term offers total returns of 5% to 6% per annum, much of which comes as income and in the current market environment, it remains hard to achieve that elsewhere.”