UK Real Estate View: Looking beyond COVID-19

Forecasting the economy and property markets remains very challenging, but since our last update we know more about the economic damage caused by the first wave of the Covid-19 virus, the initial recovery, and how the property market has reacted. In real estate markets, uncertainty clauses have been lifted and funds are re-opening.

According to the MSCI Quarterly index, All Property values fell 6.4%¹ over the nine months to September 2020. This is better than originally feared when the pandemic first accelerated, but aggregate values have been supported by the industrial sector rather than widespread resilience.

We expect All Property returns of around 5% over the 2021-2025 horizon. Whilst we believe downside risk persists, arising from worse than expected second-round effects from heightened unemployment and corporate failures, this has been mitigated since our last update by greater confidence in the availability of effective vaccines in 2021.

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