LONDON (ShareCast) - UBS says that investors should hold an 'equal-weight' position in the European real estate market, but has recommended to 'underweight the UK'.

Real estate equities across Europe have outperformed the wider market by 21% in 2012 so far.

"Our data suggests most generalists are underweight real estate, but we recommend moving to equal weight," the broker said on Tuesday morning.

"The real estate sector is trading slightly above fair value, which we view as warranted by its improving defensiveness. However, with a muted growth outlook, we believe share prices could stabilise here, but the sector should outperform a bear market."

As part of its review of the sector, UBS has upgraded both Hammerson and Capital Shopping Centres to 'buy', saying that both stocks are "pricing in lower returns, but missing the lower risk profile."

"We downgrade Land Securities and British Land to 'neutral' (valuation appropriate for their risk-return profiles). We downgrade SEGRO to 'neutral' (we like the dividend yield, but are cautious on net asset value)."

The following changes to ratings/target prices are as follows:

British Land: UBS downgrades from 'buy' to 'neutral', target cut from 575p to 560p.
Capital Shopping Centres: UBS upgrades from 'neutral' to 'buy', target lifted from 310p to 365p.
Hammerson: UBS upgrades from 'neutral' to 'buy', target lifted from 480p to 490p.
Land Securities: UBS downgrades from 'buy' to 'neutral', target cut from 870p to 840p.
SEGRO: UBS downgrades from 'buy' to 'neutral', target cut from 250p to 240p.

BC

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