Insurers aim cash back into property

Life insurance companies are about to return to the property market in a big way.

Over half the insurance companies interviewed by Gallup for the latest CSW-The Property Week quarterly survey said they intended to be net investors in property over the coming year, putting in more than pounds 650m.

Only one in eight expected to sell more than they bought - whereas over the past year there has only been a small balance of net investors. By contrast, the pension funds remained likely to be net disinvestors.

Overall, the survey shows a convalescent market, with the majority of institutional respondents expecting a pick- up in demand and rents in the shops market within the next year, but no overall recoveryuntil the second half of 1994. And even the insurance companies remained pessimistic about the hardest-hit regions, such as the South-East and, especially, the City of London.

The increased demand does not surprise property market professionals. Chris Bartram, managing partner of Jones Lang Wootton, said: 'British property has significant attractions for those who have decided that it is a legitimate hedge against low yields on the stock market, falling dividend cover, and those who are cynical about inflation.'

The result of the interest is an increasing gulf in the property market, especially in London, between the minority of 'investment-grade' properties let to secure tenants on long leases, and the bulk of unlettable and so increasingly unsaleable properties on offer.

Gallup found that the insurance companies face competition for the better properties from foreign institutions and wealthy individual investors which are also expected to increase their involvement over the next year.

As a result, says Andrew Waters of Richard Ellis's investment department, 'one of the features of the market at the moment is the dearth of good- quality stock. But if you wait for the performance numbers to come through then you could miss the boat'.