Euro property to outperform UK, says Stirling

Published 26th Jul 2007

European property is set to outperform the UK across all sectors, according to Morley’s property expert Ben Stirling.

Stirling, head of European property at Morley, says this projection is based on rental growth forecasts per annum for 2007 to 2011. Morley is forecasting a total return of 6.6% per annum with a 5% per annum income component. The current income yield for the European property is 5% as of 8 June, he noted.

Stirling believes Germany is currently one of the strongest European economies after experiencing a strong recovery across all property sectors. Morley is very active in this market, he said. Morley, which runs the €240m European Property Fund for Norwich Union, is also positive on the French market, particularly the Paris office space.

Valuations in Spain are an issue especially in office space, but opportunities are present in retail. A similar story is currently occurring in Italy and he is finding opportunities in the retail sector but avoiding the office sector.

Meanwhile, the Nordic region is having a strong cyclical recovery and South Europe retail is strong. However, he is struggling to find value in Central Europe and is negative on the region. Stirling said the asset class has low correlation against both UK property and other asset classes making it a strong portfolio diversification tool.

He is also positive on the Europe region as he believes the growth of activity in Pan- European investing over the last 10 years has brought liquidity and transparency.
He describes the investment process on the European fund as being stock driven.

“Stock selection is the key driver,” he said. “80% of the assets are bottom up, and only 20% of the performance is top down.”

Source: ' Investment Week '

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