The latest ONS quarterly institutional investment figures

Citation

(1999), "The latest ONS quarterly institutional investment figures", Property Management, Vol. 17 No. 1. https://doi.org/10.1108/pm.1999.11317aab.013

The latest ONS quarterly institutional investment figures

The latest ONS quarterly institutional investment figures

Keywords Property investment, Statistics

Greg Nicholson, Head of Investment at CB Hillier Parker, commenting on the publication of the Office of National Statistics' (ONS) figures for institutional investment in property for the second quarter of 1998, said:

The latest figures confirm that institutions remain confident concerning the property market in these more turbulent times globally. This is the first time that we have seen two concurrent quarters of net property investment being over £1 billion. In the previous 13 years we have only had two quarters with above £1 billion of net investment [see Figure 1].

Greg Nicholson sees this as being caused by the continuing solid returns being made in property. He said: "Rents are still rising in real terms, and yields are well above those for gilts (the CB Hillier Parker average yield is at 7.3 per cent for August). Investors are seeing the rollercoaster ride shares are having and the very low yields for government bonds, and realising that property remains a good investment. The fundamentals of the property market remain good", he continued, "with less speculative supply and real rents still well below what they were before the last property crash.

"Investors are realising this, and though we are all expecting some slowdown, property returns should still hold up over the next few years, especially in real terms. The important thing is to ensure you get good quality defensive stock to ensure a steady return as the market cools down. The large drop in overall turnover shows that investors are being more choosy, but the fact that sales dropped by a higher percentage than purchases shows that companies are not abandoning the sector, in fact the opposite".

The main points of the ONS findings are:

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  Total net investment in property by pension funds and insurance companies fell from £1,218 million in the first quarter of 1998 to £1,045 million in the second quarter. This is the first time that net investment has remained above £1 billion for two quarters, and only the fourth time that it has been above £1bn; the previous times were 1994 quarter two (£1,426 million) and 1989 quarter four (£1,012 million).

  

  Figure 1.Total property net investment

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  Total turnover fell by 39 per cent from £4,280m. to £2,595m., with insurance turnover falling by 51 per cent (to £1,357 million) and pension company investment falling by 17 per cent (to £1,238 million).

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  The fall in insurance company turnover was caused by a 41 per cent fall in purchases to £1,118 million (the lowest level since 1997 quarter one), and a remarkable 79 per cent fall in sales to £239 million (the lowest level since 1986 quarter three). The 17 per cent fall in pension fund activity was less dramatic, caused by a 19 per cent fall in purchases and a 13 per cent fall in sales. Overall, purchases fell by 34 per cent and sales by 49 per cent.