U.K. Real Estate Stocks Fall After HSBC Cuts Rating

U.K. real estate stocks fell in London trading, led by Hammerson Plc, after HSBC analysts reduced the industry to ``underweight'' and said prices may fall by a third.

The 4.6 percent rally for U.K. real estate stocks in January was a ``false dawn,'' analysts John Fraser-Andrews and Nicholas Lyle said in a note to investors today.

Investors should expect stagnant rental growth, or even worse in the event of a recession, and as much as a 35 percent decline in commercial building values through the end of the third quarter, the analysts added.

There is ``a one-third potential stock value downside after the January 2008 sector bounce,'' they said, citing revised cash-flow-based valuations.

The analysts cut Brixton Plc, Land Securities Group Plc and Segro Plc to ``underweight'' from ``overweight.'' British Land Co. and Hammerson were lowered to ``underweight'' from ``neutral,'' while Fraser-Andrews and Lyle left unchanged their ``underweight'' rating on Liberty International Plc.

Hammerson declined 78 pence, or 6.8 percent, to 1,067 pence in London. Brixton fell 4.4 percent to 333 pence, British Land was 4.8 percent lower at 951 pence and Segro declined 4.6 percent to 501 pence. Land Securities shed 4.2 percent to 1,547 pence, while Liberty International lost 6.4 percent to 1,009 pence.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net

To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net