Bank: real estate poses ‘threat’
UK commercial real estate has posed a threat to the country’s financial stability since the EU referendum result, the Bank of England said today.
Among the risks listed in the Bank’s Financial Stability Report is a continuing price correction following further slowing of activity in commercial property, with prices falling by 2.6% since 23 June.
With volumes down by 27% from a year ago, the Bank of England said that a continuing downturn could reduce companies’ access to bank loans as 75% of SMEs use commercial real estate as collateral.
[caption id="attachment_832281" align="alignright" width="200"] Bank of England[/caption]
UK commercial real estate has posed a threat to the country’s financial stability since the EU referendum result, the Bank of England said today.
Among the risks listed in the Bank’s Financial Stability Report is a continuing price correction following further slowing of activity in commercial property, with prices falling by 2.6% since 23 June.
With volumes down by 27% from a year ago, the Bank of England said that a continuing downturn could reduce companies’ access to bank loans as 75% of SMEs use commercial real estate as collateral.
Although prices have fallen, the report showed that yields have stayed low, particularly in prime London offices, which suggests that prices are elevated relative to rents.
Sectors with elevated prices are at a greater risk of price corrections, the report said.
Meanwhile, both overseas and domestic investment has fallen to pre-2014 levels.
However, the report said that the industry had stabilised, with “broadly flat” prices in October, the lifting of uncertainty clauses and the re-opening of the open-ended funds that closed to redemptions in July.
From August: Industry expects boost from record low rate
From July: BoE warns of risks to UK financial stability
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