Ignis warns on short term property risks

Ignis has warned investors in its £510m UK Property fund to expect a short-term drop in capital values but believes returns will remain positive.

The firm says given the short-term disconnect between capital value growth and rental value growth, yields for prime stock run the risk of over-correcting in the short term leading to a moderate retrenchment in capital values. Ignis says the situation has been exacerbated by an insufficient supply of quality properties to meet demand, with 20% of the fund currently being held in cash. The company remains "very positive" on commercial property in the medium term and predicts returns of between 8% -9% per annum. Even in the short term returns will remain positive, it adds. Ignis says...