The IPF consensus forecasts for rental growth and capital value growth this year have improved - but forecasts for total returns next year and the year after have weakened.
The IPF UK Consensus Forecasts report is based on independent forecasts from 24 property consultants and fund management firms. It summarises forecasts of rental and capital value growth and total returns for all property and individual sectors and sub-sectors (including central London offices) covering the five-year period from 2017 to 2021.
The report shows the all property average rental growth forecast for the current year has risen to 0.6%, from 0.2% in February, and -0.5% in November 2016. Capital value growth rates have improved but remain below zero for most sectors, with industrial and standard retail being the only sectors forecast to deliver positive growth, at 3.3% and 0.4% respectively.
The average capital value growth forecast is now -0.6%, as against -1.6% three months ago, while the all property total return reflects these improvements, now standing at 4.8% from 3.2% in February.
Rental growth forecasts, whilst weaker for 2018 than 2017, have firmed over the quarter, averaging 0.3% for all property, as against 0.1% previously.
However, capital growth projections for next year have fallen across all sectors except industrial. The decline in the all property average has been arrested and now stands at -0.6% from -0.7% three months ago.
As a result, total returns in 2018 are now expected to be 4.1%, down from 4.3% last time.
The outlook for 2019 has also softened, particularly so for capital growth, down to 0.1% from 0.8%. The total return forecast for 2019 is now 4.9%, down from 5.8%.