Peter Bill on Wednesday

Time for the Bank of England to stop behaving like the circumspect Old Lady of Threadneedle Street and start acting like a demanding doctor, now the central bank has been given the prescription by the property industry for rectifying cyclical ills • French BNP Paribas may well regret swallowing oh-so-English Strutt & Parker – if the deal comes off. Who can force lenders to curb their enthusiasm in a rising market? No single entity on the planet, at least when it comes to funding UK property deals from abroad. In 2016 half the £44bn of new loans were advanced by foreign lenders. But can the Bank of England dampen spirits among UK banks and insurance companies? Last week the Property Industry Alliance published a 28-page examination of past property cycles and suggested a way values based on Red Book rules could be clipped by applying an “adjusted market value”. Put simply, it is: “Never mind what the valuer is asserting, knock 15% off the value of the pledged asset, as history tells us the market is 15% above its long-term average.” An eminent group of experts, led by ex-Hermes boss Rupert Clarke, has refined a set of warning signal formulae first published in 2014. Three years on, the adjusted market value methodology has been chosen as the most accurate way to flag up pain to come. This report should not be treated as an academic exercise. The commercial property crash that began in June 2007 triggered a widespread recession. A PIA look back at the numbers shows that 2004 was the year when the AMV brake should have been applied. What did the Bank of England feel that year? “Commercial property lending provides little cause for immediate concern.” In May 2007 the Bank warned too late of “potential vulnerabilities”. This time around the Bank has welcomed the PIA report. Alex Brasier, the Old Lady’s man in charge of financial stability, said: “This work by the property industry, for the property industry, is a vital step to guarding against the same mistake being made in the future. All borrowers and lenders should take note.” Take note! Alex, please, bonus-hungry bankers building a debt book won’t take the slightest notice unless you order their bosses to apply an AMV percentage. Even then they will try and fiddle the numbers to make the deal work rather than the deal going off to some unregulated foreign lender, which is, of course, a problem that is not going to go away, whatever happens. Diagnostic tools have been provided by the industry. Half a dozen “next steps” has been recommended by the working group. Most concern themselves with improving and publishing data, which is a warning that the exercise itself is turning academic. None overtly recommend asking the circumspect Old Lady of Threadneedle Street to become a demanding doctor. But happily there is delicate talk of “exploring how the methodologies could be used in practice”. Comments on which next steps to take have been invited. Please send yours to group secretary Peter Cosmetatos by 15 September. Here’s one: “Good work. But, please, can we get going before the next crash hits?” Strutt deal may devalue in mistranslation My two-pennies’ worth on reports that Strutt & Parker is to be subsumed by BNP Paribas, given in blissful ignorance of the facts, is this: if the former is taken over by the latter, the latter will one day regret taking over the former. French metropolitan culture permeates what long ago used to be Weatherall Green & Smith. This culture is not compatible with the county-town ethos at Strutt & Parker. At the very apex of the boom, on 10 July 2007, globally expansive DTZ bought jolly UK retail agent Donaldsons, in what turned out to be a very bad deal. Breakfast at the Ritz on 11 July with each party present was an awkward business for EG. While one side was being very jolly, the other spent much of the time looking down at their scrambled eggs and smoked salmon. One justification for the deal put forward by DTZ was that it was a “close cultural alignment”. All around the table knew this to be fiction. Peter Bill is the author of Planet Property and former editor of EG. Follow Peter on Twitter