Jones Lang Wootton - Direct Property Investment Remains Well Priced

Date: 04 Aug 1998

The Jones Lang Wootton UK Property Index showed a total return of 3.5% in the second quarter of 1998, contributing to a return of 17.3% in the year to June. This compares with 29.7% for equities and 23.6% for fixed coupon gilts.

The quarterly return of 3.5% to June matched the first quarter of 1998. However, many of the movements which contribute to the sample's overall return have improved compared with the first quarter of 1998. These include overall rental value growth which is currently running at an annualised rate of 8.1% and has improved across all three main sectors, and capital values/total returns to retail warehouse and industrial properties. Retail warehouses look set to be the best performers again in 1998 with a current annualised return of 31 %.

Annualising the current quarterly performance for the whole Index sample indicates a total return for the UK property market in the order of 15% in 1998, in line with our forecast at the start of the year.

Mark Hall, partner in Jones Lang Wootton Fund Management's Investment Strategy Team commented: "Despite a degree of caution in all the investment markets brought about by uncertainty over the economy, direct property investment remains well priced relative to equities (including property shares) and gilts. Furthermore, direct property is a defensive hold in that it stands to perform relatively better than equities or gilts under the more likely short to medium term downside scenario for the economy. Gilt yields are lower than they have been for 30 years and many commentators are concerned that the equity market is overpriced. Against this background, major investors continue to have an appetite for direct property, and for instance,

Jones Lang Wootton Fund management currently have nearly £400 million to be invested in UK direct property on behalf of our clients, in addition to the £170 million invested so far this year."

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