Would you please mind the yield gap

Article Abstract:

The prospect of deflation emerging is likely to prompt politicians to seek to pre-empt falling prices and revive the world economy. If this happens, then long gilt prices are not attractive at present levels, even though they could fall even lower. In relation to property, the yield gap, both in terms of gilt and of equities, seems too large. It is likely that the equity yield will rise, especially if there is a correction on Wall Street. Any large, favourable change in the yield in relation to gilts may not take place until the next economic cycle.

Economic aspects

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Beware paradigms and pundits

Article Abstract:

It is important that those who are considering investing in the property sector are aware that economists can be guilty of misjudging trends. Economists are often influenced by fashion, and many tend to take a short-term view. Germany and Japan have traditionally been widely seen as having very strong economies, but in fact the English-speaking economies have performed much more strongly since the late 1980s. Indeed, many non-English-speaking economies are at a strong disadvantage.

Analysis, Investments, Economic forecasting

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Playing with property risk

Article Abstract:

Extensive research has been undertaken into the unstable nature of the commercial property market and the failure of developers to react rapidly when rents start to rise and vacancy rates fall. These factors create additional difficulties for lenders, with lenders' lack of caution often encouraging developers to take unwise risks. Property can certainly produce substantial new lending opportunities, but property companies are generally poor credit risks.

Finance

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