Surveyors predict property revival

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Commercial property values will start rising again this year after a year of underperformance against other asset classes and continued divestment by investing institutions, according to an industry survey out today. The findings by the Royal Institution of Chartered Surveyors chime with other reports this week pointing to increasing overseas interest in UK property, increasing tenant demand and rising rents.

Graham Chase, RICS property spokesman, said: "During 1996, tax cuts and falling interest rates will improve consumer confidence, benefitting the property sector and the economy as a whole. We forecast that commercial property values will rise by 6 per cent this year."

He added, however, that tenants remained in the driving seat, with landlords still forced to offer incentives such as rent free periods and short leases at low rents for all but the very best property.

According to property adviser DTZ Debenham Thorpe, property values will also be driven by overseas interest which remains strong, despite a disappointing return last year of 5.3 per cent from property compared with 24 per cent from UK equities and 34 per cent from US shares.

Thanks to the purchase of Canary Wharf, US buyers emerged as the largest source of foreign investment last year, taking over from the Germans.

They have been attracted by the high yields available on property compared to fixed interest investments such as gilts. As interest rates fall, property values are expected to rise throughout 1996. Shortage of new building is pushing rents higher in favoured locations such as central London, which in turn is attracting overseas participation in development.