At all times spreading your assets and diversifying is good financial advice. Experienced IFA’s like Enable have seen the benefits of diversification over the years. Property has always been part of that diversification. Most portfolios contain property in some form even if it is just the house you live in but many also have money in Commercial Property.
But it is useful to note that the investment performance of UK commercial property over the longer term has been driven to a great extent by income return, reflecting rental payments received from tenants rather than capital appreciation. Over the 20 years to December 2010, commercial property delivered annualised total returns of 8 per cent per year, with the income return contributing 6.9 per cent per year.
In the nine months up to the end of September 2011, UK commercial property reported a total return of 6.4 per cent, comprising income return of 5.1 per cent and capital growth of 1.2 per cent suggesting, perhaps, that property had been delivering its ‘natural’ level of performance at the present time.
Property yields retain a considerable margin over dividend yields and an even more pronounced premium over 10 year gilt yields which have fallen as low as 2.5 per cent in recent weeks as concerns over the Eurozone sovereign debt crisis and whether the UK was heading towards a ‘double dip’ recession pushed investors towards extreme risk aversion.
The net income return delivered by property is however still proving attractive to investors for both investment performance and diversification benefits. Enable IFA’s of Bishops Stortford are happy to help you evaluate your diversification in these volatile times.
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