Morgan Stanley (NYSE:MS) said in its latest property outlook that 2024 could be the year of direct market price discovery, meaning house prices could finally align more closely with market value.
This could create significantly “differentiated share performance” in the property sector, according to its analysts.
Investor apathy is starting to abate, Morgan Stanley (NYSE:MS) analysts said in a research note on Wednesday, amid the latest change in the direction of policy around interest rates.
Analysts said that amid prevailing conditions, which include December’s interest rate freeze, UK real estate investment trusts offer scope for sustained performance.
The UK is the investment bank’s preferred region for property investment, accounting for seven of 11 overweight stocks in its portfolio.
Analysts expect that in 2024, valuations will drive lower, triggered 'by debt maturities', while demand could slow in the rental market.
“Companies hold too much leverage against portfolios that are overvalued, owing to a rise in the cost of capital and a reduction in the availability of capital,” analysts said.
Morgan Stanley analysts said they expect investors getting back into property stocks might opt for well-capitalised names, such as Derwent London PLC (AIM:DLN) and British Land Company PLC (LSE:BLND).
Its other 'compelling' stock picks include student housing companies such as Unite Group PLC (LSE:UTG), and logistics enterprises like SEGRO PLC (LSE:SGRO) and CTP, according to the investment bank’s analysts.
Some high-beta property stocks, which have intrinsically more volatility than other market indices, on the continent may offer a further tactical opportunity, but only for those investors that can be nimble, they said.
Continental retail stock Unibail, and Swedish stocks Castellum and Fabege remain underweight in the bank’s ratings, as does 'highly levered' Aroundtown.