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LONDON-Property is on target to outperform both equities and bonds again in 2001 according to the latest UK Property Report from ING subsidiary Baring, Houston & Saunders. In the 12 months to the end of May 2001 property returned 2.9%, as against -4.6% for the FTSE All Share Index and -0.1% for Gilts.

Average property yields are currently at 6.68% initial, with an average equivalent yield of 8.3%. And over the long term, average income return on property has been 6.5% per annum since 1970, says the report.

But the overall figures mask some wide variations in performance between different property sectors. Stock selection was crucial and the funds that did well last year were those that were overweight in London offices and industrials and underweight in shops and shopping centres. And BH&S forecasts another bad year for retail, while offices are tipped to be the strongest performing sector.

The report concludes that 2001 will probably be the low point of the present cycle with returns at the end of the year likely to be in the 6.00% to 8.00% per annum range. But, at the moment, this will still leave property ahead of the prospective performance from stocks and bonds.

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