LONDON-Investment bank Morgan Stanley recently became “officially optimistic” on prospects for listed property firms for the first time since the global financial crisis, issuing a 50-page report upgrading the sector to attractive from its prior cautious stance.

The study, signed by analysts Bart Gysens, Christopher Fremantle and Bianca Riemer, outlined what has changed: “Tailwinds from rising liquidity and inflation expectations should more than offset headwinds from debt deleveraging and refinancing in the medium term. We think the quoted property sector will continue its recent trend of outperformance relative to the broader equity market well into 2011.” The highest MS overweight stock picks are British Land, Segro and Unite, but analysts also like Immofinanz as an, “out-of-consensus call with macro-independent value-creation potential”.

Property yields and stocks’ implied yields continue to offer all-time high spreads over real bonds and interest rates, which are now likely to remain low in the medium term, the report said. The relatively attractive spread of property over bonds is insufficient for outperformance but the continuous stream of liquidity from quantitative easing by central banks will drive capital values and stocks prices further. However it warned that the prior reason for caution—a wall of refinancing and recapitalisations—has not been removed, and the QE liquidity boost is merely delaying an inevitable period of poor performance.