With so much capital chasing anything with a decent yield and without excessive risk, property remains attractive – but are these shares as cheap as they look?

The property sector has enjoyed a 10% rally over the last few months, advancing at a far faster rate than the broader equities market. This is slightly bizarre in some respects, but logical in others. The sector is or was viewed as a likely beneficiary of a Brexit deal, for reasons that continue to escape me. Throw in hopes of private equity corporate action, a realisation that some share prices were definitely at oversold levels notwithstanding still gloomy outlooks, and the injection of fresh capital from a South African REIT into Capital & Regional, and there’s just about enough to make a bull story – regardless of the fundamentals.

The buying has been pretty indiscriminate – not normally a reassuring sign – with dead cats bouncing (Intu, Hammerson, and even Land Securities and British Land) and expensive, quality companies’ shares testing new highs (Segro especially, on knock-out interim results – again). At the same time as risk has been put back on, take-up of a couple of share issuances very much in the conservative category of secure, RPI-linked long-term income (Supermarket Income REIT and Target Healthcare REIT) have been so heavily oversubscribed that the placings have been meaningfully increased to meet demand. All very confusing, but welcome nonetheless.

Some shares look cheap – which doesn’t mean they are, of course, though a few genuinely are – and with so much global capital still chasing anything with a decent yield without (perceived) excessive risk, then real estate remains meaningfully under-owned against institutional global asset allocation targets, which are around 10% of assets under management. Throw in private equity poring over the asset class and opportunity capital seeking, well, opportunities, and a right little firestorm has been created.