UK commercial property slumps as investors flee
According to (Reuters) - On Jan 26, an industry survey showed that higher borrowing costs are hurting Britain's commercial real estate property sector, as investor enquiries fell in the fourth quarter and the outlook for the year worsened.
83% of respondents to the Royal Institution of Chartered Surveyors (RICS) quarterly commercial property survey believed the market was in a downturn, up from 81% a quarter earlier. Nearly half thought this downturn was early.
Since the beginning of the pandemic, RICS has seen a positive balance of -30 of respondents citing reduced investment demand when asked about investor inquiries across all sectors.
According to Tarrant Parsons, senior economist at RICS, tighter BoE monetary policy has had a "significant effect" on the investment side of the commercial property market, with higher borrowing costs weighing on investor demand and lowering valuations.
For the past nine meetings, the Bank of England's Monetary Policy Committee has increased the key interest rate, and the markets expect another increase on February 2. In December, consumer price inflation in the United Kingdom was 10.5%, nearly five times the Bank's 2% target. Industrial saw the weakest reading since 2011 as near-term capital value expectations fell sharply across the board.
"Recently, capital values have dropped noticeably, and this is likely to continue in the near future because government bond yields have gone up over the last six months," Parsons said. Capital value averages across the UK were predicted to drop further in the coming year. Between December 7 and January 13, 940 businesses participated in the survey.