Where Next For Investment Yields
8th December, 2011.
Where Next For Investment Yields?
By Peter Wood, Investment Director.
One positive thing to have come out of the Euro debt crisis so far is all the talk of yields on the Euro Government bonds that they have been issuing, and how much Italy, Spain and others have to pay as a yield on the new bonds. This has caused the press to explain in more detail what a yield is, when ordinarily this is a term restricted for use primarily in financial and property circles. Even my young children now have a vague concept of what the term means!
As far as yields on property investments are concerned, I have talked before about the ‘flight to quality’ and investors looking for prime (low) yielding stock.
One of my favourite quotes that came out of the talk on comparative yields for Euro Country bonds compared to other countries outside the Eurozone was the answer from one commentator when asked why the UK’s bonds ‘only’ yielded less than 2% and why would people buy at that cost? His answer was simply that “people know they will be paid back” with the inference that Mervyn King can crank the handle of his money printing machines but no Eurozone leader has that luxury, the doubt being those lending to Greece etc will get their money back.
The translation into property terms is a good one, the lower the yield the more likely an investor expects to be paid back the rent he demands.
The market for investment property at the moment continues to exhibit a taste for rock solid safe investments and a chase for those best assets. The reason is the same as that driving the bond markets with loan money in short supply and a nervousness about debtors paying off all their liabilities. The result is that investors want to invest in strong covenants.
We continue to acquire property investments for clients with an emphasis on prime high street retail for a couple of acquisitive clients in the last 6 months. We are also advising on a number of pre funding agreements for developers at the moment and, with decent tenants, demand is good.
Peter is busy providing a wide range of investment pportunities to large and small clients alike. If you would like advice on any aspect of commercial property investment, Peter would be pleased to speak with you. Call him on 0121 455 9455 or email email@example.com.
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