Concern at ‘lack of caution’ in market

LaSalle, manager of £45bn in global property assets, said in an update to its Investment Strategy Annual report that both low-growth and growth markets were pricing in several strong years of continued growth.

“The relative lack of caution in the real estate capital markets is a concern,” the fund manager’s global strategist, Jacques Gordon, said.

“The re-emergence of a competitive credit market, so quickly after the bursting of the credit bubble, is also astonishing.”

LaSalle said it was not predicting the end of any pricing bubble of further falls in market value, but noted it was harder to source good value deals.

Global property investors have piled back into the sector in 2011 in search of assets to hedge against market volatility, pouring cash into emerging Asian markets and core US and European cities, such as New York and London.

LaSalle said it did see some justification among lenders and investors that property income streams were now at, or just past, trough levels and were again climbing, even in the low-growth countries.

In growth markets, rents and cash flows had been moving upwards rapidly for 12-24 months, depending on the specific property type and market.

Such a capital-rich environment provided more opportunities to profit and recapitalise assets, Mr Gordon said, with good value to be found in the less-noticed near-core, value-add and financial distressed sectors.