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16.09.2014 17:11:08

Rising rates to leave property prospects undimmed - Patrick Bone, Head of UK Property Research, discusses economic recovery and the greater importance of interest rates

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Rising rates to leave property prospects undimmed

September 2014

Patrick Bone, Head of UK Property Research

As the UK economic recovery goes from strength to strength, the path and timing of interest rate rises assumes greater importance for financial assets.

Broadly speaking, fixed income assets appear to be the most vulnerable to an increase in rates, while growth assets, underpinned by earnings, appear to be better placed.

For those with an exposure to bonds, a key question is how to reduce their portfolio’s sensitivity to rising interest rates. One asset they might wish to consider is commercial property. Property has both fixed income and equity characteristics so while exposed to interest rate movements; it is also responsive to improvements in the general economy. In our view, the commercial property market seems fairly priced.

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