Boost to UK commercial property market will be unsustainable
Monday 01 February 2010
The recent upturn in the commercial-property market is not based on fundamental improvements and is likely to prove unsustainable, according to research published today.
Although December's 3 per cent price rise was the sharpest monthly increase in more than two decades, the boost signalled only that investors were calling the bottom of the market, and will not translate into a long term recovery, says consultancy Ernst & Young's ITEM Club. "Welcome though the bounce of activity has been, its sustainability is far from certain," Dean Hodcroft, the head of real estate at Ernst & Young, said. "The upturn has largely been based on investors deciding the bottom of the market had been reached, and the massive decline in prices over the past couple of years resulting in attractive buying opportunities."
There are some bright spots: the weakness of the pound, for example, and London's position as a strong international market for trophy assets. But the Bank of England's quantitative easing programme is expected to conclude in at least the short term, so the boost from that quarter will peter out.
And the fragility of the banking sector remains a major threat. Banks are still highly vulnerable to defaults by property companies, and with vacancy rates still on the rise, and rents still falling, such defaults look set to increase. Andrew Goodwin, the senior economic advisor to the group, said: "With demand likely to remain weak across all market segments as the UK economy stutters out of recession and the possibility of the banks' leniency and support for property companies waning, the most significant risks are all on the downside. It is difficult to see how the level of recent activity can be sustained."
Liam Neeson's Downton dreams
Thriller is set in the secret world of British espionage
Bomber jacket worn by Mary Berry sells out within an hour
- 1 Scottish independence results live: Reunited kingdom - Scotland gives a clear 'No' in historic referendum
- 2 Scottish referendum results: David Cameron set to unveil major devolution of powers to England
- 3 iOS 8 is full of shiny new features - but it's terrible news for app developers
- 4 Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
- 5 Hitler’s former food taster reveals the horrors of the Wolf’s Lair
Scottish independence results live: Reunited kingdom - Scotland gives a clear 'No' in historic referendum
Scottish referendum results: David Cameron set to unveil major devolution of powers to England
Iranian blogger found guilty of insulting Prophet Mohammad on Facebook sentenced to death
Scottish independence: YouGov final prediction puts No campaign 8 points ahead - but Yes team remains optimistic
Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
Portuguese academic says British are 'filthy, violent and drunk'
iJobs Money & Business
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...
Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...