Lenders are unlikely to pass on the full benefit to borrowers and the main issue is still the availability rather than the cost of credit.
UK residential property
James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle, comments:
"The Bank of England's decision today to hold interest rates at 0.50% came as no surprise. The Bank has done all it can in terms of interest rate cuts to support the economy – it has turned its attention to unorthodox measures to try to get credit flowing again. Some of the money being injected into the economy should hopefully find its way to mortgages for homeowners in due course."
"The overall tone of the housing market remains weak with low trading volumes. We expect to see further falls in house prices as consumer confidence is being hit hard by uncertainties in job markets. The number of unemployed in the UK hit the 2 million mark during the three months to January. This will hamper the recovery of the housing market, particularly where people are unable to re-mortgage if they have lost their jobs. The fall in the value of their property means that the loan-to-value test may not allow them to transfer elsewhere when low rate trackers come to an end."
UK commercial property
Fergus Hicks, Head of Forecasting and Economics at Jones Lang LaSalle, comments:
"The occupational market is being hit hard by the recession in the economy. Corporate occupiers are downsizing their real estate portfolios to cut costs and job layoffs means that we expect to see a significant increase in secondary space released back on the market, increasing the overall supply of available space. Commercial rents are expected to continue falling in 2009 and 2010 before stabilizing in 2011."
"A clear trend that has emerged in the investment market is the disconnect between prime and secondary properties. There are tentative indications that the prime end may be stabilising in the Central London market including the City of London whilst secondary properties will see further yield shifts. It is evident that investors are focusing on prime product given its lower risk profile and relative attractive pricing at the current economic environment. The weakness of sterling is causing some investors to see the UK market growing in attractiveness and for the best assets – there is competitive bidding."
