Is there value in UK REITs ?

The Brexit has been painful for UK banks, but also for REITs with the trouble of many open-ended funds sold in the UK mainly. But what about the stocks themselves ? Well, if you look at the following charts from Exane, there are probably some value to look for from there…

I jump directly to the conclusion:

« This stability is supported by the business model and oligopolistic industry structure where a land bank is acquired at reasonable prices over time and developed/sold into the market at more profitable times. We see opportunity here for the bold investor. This is not a systemic crisis, and with housing market support from fiscal and monetary policy likely allied to the positive structural picture, the markets’ pricing in of an ‘adverse’ scenario seems harsh. »

Exane puts up a number of interesting charts, but the 2 most interesting in my opinion are the following:

UK-REITs-DY-Exane UK-REITs-Price-Recessionary-Levels-Exane

The chart right above shows us how much fear is already priced in the UK REITs sector. Yet, contrary to the views of Exane, if you consider that the UK will be in a recession next year and that there might be additional stress in the financial sector (due to the headwinds UK banks are facing right now and for the foreseeable future), maybe investors should consider a worst case scenario and refer back to the valuation levels reached in 2008-09…

Yes that’s extreme and that’s not the scenario privileged by Exane. But history tends to rhyme, if it doesn’t repeat itself… And investors should remember just how bad things can be before trying to catch what is still a falling knife.

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