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Property markets in the United Kingdom will likely see a broad-based recovery from 2010, as values dip to a level that makes returns seem attractive for investors, Schroders' said on Tuesday.

The asset management company wants to raise 400 million pounds by end-2009 to capitalise on the expected upswing, and has so far received interest from investors to commit a quarter of that, Schroders' head of property William Hill said.

"There are signs we might get some stability in the prime end of the market from the end of next year leading to a recovery in 2010, and that could be attractive to buy," Hill told a media briefing.

The country's commercial property prices dived a record 4.3 percent in October, taking the market's total decline from a June 2007 peak to about 28 percent as the economy edged closer to recession.

The combination of a limited new supply of retail and office space, and steady growth in rentals instead of dramatic spikes over the past decade are "reassuring factors" for a recovery, Schroders' head of property research, Mark Callender, said.

He estimates that, with the continued falls in capital values, and as rentals hold steady, yields could grow to more than 7 percent in 2009, making property an attractive investment compared to bonds or equities.

"Given the outlook for the economy, we're not going to see a recovery in rents very quickly. But property will start to look cheap relative to other assets, especially for new investors coming into the market," Callender said.

"We expect the recovery to be broad-based, with the retail market performing most strongly due to their defensive qualities," he said.

RISK AVERSION

The ongoing financial crisis and ensuing global economic downturn has led to greater risk aversion among investors, but this could also benefit the UK property market, Hill said.

"We do expect investors to move away from the more exotic markets and back to the core, secure markets that a few years ago may have been overpriced. And UK will be a beneficiary of that," he said.

While fund managers worldwide are facing heavy outflows this year as investors pull out their cash due to poor returns, Hill said redemptions for Schroders' property unit has been relatively low at 2 million pounds paid out year to date.

"We think our core clients are generally taking a long-term view. Those that have been more interested in getting out have tended to be from the fund of funds market," he said.

Schroders', whose clients include pension funds, governments, and rich individuals, had 1.4 billion pounds invested in its managed property funds at end-September.

Source: http://uk.reuters.com/