Recovery Signs Emerge, Morgan Maintains Positive View on UK Property Stocks

Analysts at Morgan Stanley say UK property stocks may be turning the corner on a “lost decade”, with the UK seen as the preferred European property sector as signs of a recovery emerge. Analysts including Bart Gysens and Ana Escalante at Morgan Stanley said: “Confidence is returning, balance sheets are healthy and assets have been marked down.” They raised their view on European property to “attractive” and added: “We are clearly bullish on UK property investment trusts.” The UK property market has struggled in recent years as rising interest rates have increased the cost of mortgage repayments for borrowers and put pressure on the indebted UK property sector. A weak economy has also led to falling commercial valuations. The FTSE 350 property investment trusts index has fallen 1.7 per cent this year, while the European Stoxx 600 property index has risen 2.9 per cent. UK property stocks have been struggling since the launch of the 2022 mini-budget. As the Bank of England cut interest rates for the first time since the pandemic last month, hopes are growing that the sector’s woes will start to ease. Morgan Stanley said there were signs that UK property investment trusts may be entering the next cycle, citing strong equity financing, dealmaking and operating performance. On Monday, Rupert Murdoch’s REA Group Ltd said it was considering a bid for property portal Rightmove Plc, sending the UK company’s shares up 25 per cent. Recent data also provided reasons for optimism. While the Nationwide’s UK house price index unexpectedly fell month-on-month in August, the Bank of England showed mortgage approvals were rising, pointing to stronger performance in the autumn.