A recent Trustnet study highlighted the quarterly review from the Royal Institute of Chartered Surveyors, which said sentiment towards the property sector is improving.
However, more than a third of the 532 Trustnet readers polled said they thought property would be the worst-performing asset class in 2011.
Source: Trustnet.com
Danny Cox of Hargreaves Lansdown says that, while there may be opportunities in top-end UK commercial property, he remains unenthused by the investment vehicles that are on the market.
"Old buildings that are expensive to run and have no air conditioning are still in the doldrums. We would expect these types of property to fall off a bit rather than rise," he said.
"At the other end, prime properties are cheaper to run, can be let out for decent rates and are ecologically sound. In these properties the market appears to be going forwards."
"However, premium properties with premium tenants attract premium prices and there aren’t a lot of investment funds that operate exclusively in this area," he added.
The Trustnet poll also revealed that more than a third of investors think fixed interest will be the worst-performing asset class in 2011. A recent Trustnet study indicated that investors are fleeing corporate and Government bonds to protect themselves from inflation risk.
Performance of sectors over 1-yr
Source: Financial Express Analytics
According to Financial Express data, the average fund in the IMA Property sector has returned 11 per cent over the last year, compared with less than 6 per cent from the Corporate Bond sector. However, the average UK property fund has returned just 6 per cent.
Kerry Nelson, managing director at independent financial adviser Nexus, says that while yields can look attractive, investors must be wary of the associated risks.
"Yields are positive versus fixed interest and cash but a look at the average high street tells you about the risk of property being sat empty," she said. "It is also quite an illiquid asset class. Investors can be forced to sit in an asset class they don’t want to be in."
Darius McDermott, managing director at Chelsea Financial, says that he is not overly enthusiastic about the returns available in the average UK property fund.
"What we would expect is to get income plus a small amount of capital rise over time, something like 6 or 7 per cent," he said. "But there has been more of a mixed bag."
"One of the larger funds, Aviva Investment Property Investment, has lost 3.3 per cent over the last 12 months. L&G UK Property Trust, which is actually on my buy-list, has returned 8 per cent."
"The commercial property market is a reflection of the economy as a whole. If businesses are doing well then you would expect them to expand to bigger premises. Given the latest GDP figures, that doesn’t seem to be the case."
Performance of funds over 1-yr
Source: Financial Express Analytics
Chris Spear, managing director of Spear Financial, thinks that dedicated property funds do not represent the best way of exposure to the asset class.
"I’ve steered clear of property funds for some time now. Decent yields will protect property funds but we won’t see any big gains or big losses," he said.
"The prime property sector is the one which looks the best, but for my property exposure, I prefer to use one of the multi-asset boys."