Aug

5

I have found recently that whilst property prices have not declined at all in the UK, REITs are down 25-30% from their peak. Relative strength of REITS against the FTSE also seems to be turning.

Hypotheses:

a) The illiquidity of the UK housing market plus things like 'fixed rate mortgages' has led to an imbalance between property stocks and property, and this will gradually close over the coming years. b) The squeeze on the consumer (government, housing stagnation etc) plus the crisis in exotic debt will lead by force to a considerable rise in defensive stocks (drug/food producers etc) and quality bonds, certainly relative to UK housing. c) UK interest rates will fall just as they've been doing in the US. GBP/$ rate? Who knows, but I wouldn't bet strongly on the current 'trend' continuing.

I have no idea how to test this (for example REITS are new here) and no doubt I'm as bad as most other people at macro analysis. But comments are welcome.

As a disclaimer, I am increasingly long defensive stocks and corporate bonds for no concrete reason. So confirmation bias is no doubt present in the above.

The bottom line is that I would say I am somewhat bullish REITS vs property itself, not much idea about anything else.


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