Property values stop falling

PROPERTY values have stopped falling, according to Hillier Parker, the chartered surveyor. And it yesterday estimated that property companies and institutions have up to pounds 10bn they want to invest in the market, writes Heather Connon.

The firm reports that yields - rental income as a percentage of the value of the property - on offices fell from 9.3 per cent in May to 9.1 per cent in June, the first fall in its index since August 1989.

Central London offices, which were worst hit by the property collapse, enjoyed their first fall for four years when yields dropped from 7.5 per cent to 7.3 per cent.

Hillier Parker also calculated that pounds 7.25bn is available for investment in property, of which pounds 3.9bn comes from pension funds and insurance companies, and the rest from property companies and overseas investors.

It estimates this could rise to as much as pounds 10bn if institutions that were not part of its survey are included. 'That is the highest for a decade,' said Russell Schiller, head of research at Hillier Parker. 'Higher even than between 1986 and 1988 (when the market was surging to its peak)'.

Property has enjoyed a resurgence of interest in recent months, with property shares soaring and a number of companies raising money to invest in the market. Hillier Parker is, however, the first to provide formal evidence of recovery in a special edition of its 'Average Yields' survey, usually produced quarterly.

The recovery is so far restricted to prime retail and office property, on long leases to good tenants - which represents about a quarter of the market. But the firm cited examples of recent deals that had attracted a large number of institutional bids as evidence that the interest could soon widen.