Considering that interest rates cannot really go any lower, the Bank continues to focus on quantitative easing. Base rates are now expected to remain at historically low levels until 2010 at the earliest, with a rise to coincide with strengthening demand growth.
UK residential property
James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle, said:
"There are tentative signs that the pace of decline in house prices is beginning to moderate. The three-month Libor rate, on which most mortgages are based, has fallen from 1.45% at the beginning of May to 1.28% now. The fall suggests that liquidity is starting to come back to the money markets which will hopefully feed through to mortgages."
"However, it is still too early to suggest that the housing market has bottomed out. Mortgage approvals are still down – the latest statistics from the Council of Mortgage Lenders show that total mortgage lending fell to £10.4bn in April from £11.4bn in March. Furthermore, rapidly rising unemployment and limited access to credit continue to weigh on the housing market."
UK commercial property
Paul Guest, Head of EMEA Research at Jones Lang LaSalle, said:
"With weaker business sales and lower growth forecasts across the globe, occupiers are under increasing pressure to reduce their real estate footprint. UK unemployment has reached 2.2 million and the prospect of a rapid pick up in hiring is slim, given fragile business confidence. Cost cutting and space efficiency targets are high on the agenda, resulting in the first signs of occupier led space coming to the UK markets. Further rental declines and increasing incentives are expected."
"The commercial property market continues to see a divergence between prime and secondary assets. Prime assets are attracting strong interest from investors, from within the UK and outside, where the limited level of stock coming to market is resulting in competitive bidding and yields, in some cases, falling. On the other hand, there remains limited appetite for secondary assets at the present time with investors unwilling to take risks in those markets that are most susceptible to tenant failures and falling rents resulting from the impacts of the continuing recession, especially rising unemployment."
