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LONDON-New research from Lambert Smith Hampton maps the impact of the slowdown in the UK economy on the property market. With UK GDP growth for 2001 now expected to fall to 1.9%, businesses are in less expansionary mood, which is reflected in demand for property.

As the pressure on the supply of property has eased, rental growth has fallen markedly and LSH points to the latest IPD figures showing all property rental growth at 3.7% in the year to September 2001. Retail rental growth fell to 2.1%, and industrial to 3.1%. The office sector performed better although growth was down by almost half from 10% earlier this year to 5.9% at present.

As rents have fallen, yields have continued to climb, and all property yields have risen from 6.63% to 6.99% in the past 12 months. But according to LSH, property remains a relatively safe investment which is helping to maintain investment turnover, particularly in higher-yielding properties.

Looking ahead, LSH notes that GDP growth is expected to rise in 2002 to 2.1%, fuelled by lower interest rates and higher Government spending. And current projections are for 2.6% GDP growth in 2003 and 2.5% in 2004. This means that property returns should remain positive, although subdued.

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