Blanchard Consultancy – the independent construction consultant

The value of UK commercial property will have more than halved by the end of the decade as rental demand continues to wane, according to a report out today.

The Royal Institution of Chartered Surveyors (RICS) predicts that the commercial property market will see a fall of at least 16% in capital values in 2009 and up to 10% in 2010. Capital values have already fallen 25% since the onset of the credit crunch in June 2007. This would mean steeper falls than in the recessions of the 1970s and early 1990s.

Oliver Gilmartin, senior economist at RICS, said: "We are only halfway through the price correction in the commercial property market, with values set to fall through 2009 and 2010 as rental declines gather pace. Transaction activity is set to rise, however, as more sellers become willing to accept lower bid prices."

The report says that rising defaults will prevent a near-term recovery, and the investment market will be sluggish for some time to come.

Article continues at Guardian online

Labels: commercial mortgages, commercial property prices, RICS

The balance of surveyors reporting demand for commercial property in Q3 has fallen at the fastest pace in a decade, says RICS’ Commercial Property Survey published today (3 November 2008).

52% more Chartered Surveyors reported a fall than a rise in demand compared to 50% in Q2 2008.

All sectors remain firmly in negative territory for the fourth consecutive quarter with the industrial and office sectors dropping to the lowest balance in the survey’s history.

The worst hit area continues to be the retail sector with 59% more Chartered Surveyors reporting a fall than a rise in retail demand, a slight improvement from 63% in Q1.

The continuing financial turmoil and a slowing housing market is clearly weighing upon both retailer and consumer confidence.

The net balance of surveyors reporting new occupier enquiries in Q3 declined at the fastest pace in the survey’s history.

Read more at the RICS newsroom

Labels: commercial mortgages, credit crunch, property prices, RICS

Across the UK, houses are selling at an average of nine percent below the asking price with sellers in some regions being forced to accept as much as 12.5 percent discount off their advertised price, says RICS research published today.

As economic fundamentals continue to worsen, the gap between selling and asking prices is widening. In the North vendors are accepting the lowest offers – averaging 12.5 percent below the marketed price.

Vendors in the North West, East Midlands, West Midlands and Wales are accepting offers averaging approximately 10 percent below but in London the figure stands at 8.5 percent.

London has remained firmer than most as its diverse economy and large job market offers sellers more room for optimism.

Read the full article at the RICS newsroom

Labels: House market, property prices, RICS

Large scale public sector projects such as Crossrail and those linked to the 2012 Olympic Games, including the East London Line and Thameslink, are in danger of dipping further into the public purse due to significant increases in costs, according to the Civil Engineering Market report from RICS’ Building Cost Information Service (BCIS).

Raw materials and labour costs have risen by 12.2 percent over the past year and, with costs forecast to rise by a further 12 percent over the next two years, public sector project contingency plans will come under increasing pressure to stay out of the red.

With infrastructure output rising by eight percent and new orders growing at a rate of 26 percent in Q1 2008, this sector is expected to be one of the few growth areas in UK construction over the next few years, offering some firms an antidote to the current downturn in the market.

However, the rises in the costs of cement, steel piling and fuel are having a dramatic impact on civil engineering construction costs.

Overall infrastructure output is predicted to rise by nine percent in 2008 and seven percent in 2009, while BCIS forecasts costs to continue to rise at a rate of 6.5 percent in 2008 and 6 percent in 2009.

Read more at the RICS newsroom

Labels: Civil engineering market report, Crossrail, infrastucture projects, Olympic Games, RICS, rising costs public projects, Thameslink

The Bank of England held interest rates steady at 5% yesterday as it decided inflationary risks were too great to allow it to cut borrowing costs to boost the flagging economy.

The monetary policy committee's decision followed a flurry of gloomy data about the state of the economy in the UK and beyond, and appeared to be backed by a senior figure at the International Monetary Fund, who suggested global inflation is back and policymakers should act aggressively if things start to get out of hand.

John Lipsky, the IMF's deputy managing director, said in New York: "Signs of more general inflation pressures would justify a decisive policy response, lest the impressive gains in global stability attained in recent years be sacrificed."

There had been calls for the Bank to match last month's quarter-point cut and bring some relief to the struggling property market. Nicholas Leeming, of propertyfinder.com, was unhappy at the lack of action: "The Bank can't afford to wait another month before it acts again. Mortgage lenders have all but withdrawn from the market, leaving many homebuyers unable to qualify for financing and many unable to get it at a price they can afford.

"The housing market has come to a standstill but there's no shortage of buyers, just a shortage of mortgages, which is now impacting the wider economy. Inflation remains a threat, but further immediate intervention, as well as future rate cuts, is now essential to stimulate lending, the housing market and the economy."

The decision had been widely expected in the City, though some economists had expected the MPC to cut rates after a run of weak data from the dominant services sector, the manufacturing sector, the housing market and the retail sector.

David Kern, economic adviser to the British Chambers of Commerce, said he was disappointed the MPC had not cut rates. "We believe this decision was a mistake given the serious threats to economic growth. The MPC has missed a valuable opportunity to underpin business and consumer confidence and to limit the potential damage to the economy."

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said that slowing economic activity was the most pressing issue for the authorities. "Housing transactions have collapsed, consumer confidence has sunk to its lowest level since 1992, the service sector appears close to stagnation according to the latest CIPS survey and the retail sector is under immense pressure."

With mortgage approvals down nearly to half what they were a year ago and housebuilders' reservations having tumbled by two-thirds, economists are concerned that falling house prices and tumbling consumer confidence could lead to a slump in consumer spending, which accounts for two thirds of the economy.

Latest estimates suggest the economy has slowed to well below its long-term average growth rate and is likely to slow further. However, the MPC is conscious that inflation is above its 2% target and likely to rise in the coming months.

Lipsky said inflation concerns have resurfaced even as global growth slows. "The effects of the slowdown are being felt most keenly in the US, but growth in all regions of the world is slowing," he said.

The IMF remains optimistic that the world will not experience a return to a 1970s-style inflation spiral, although the risk of such an outcome could not be dismissed, Lipsky added.

Oil prices hit a fresh high of $123.93 on Wednesday and the AA is releasing figures today showing the cost of motoring has risen 11.5% over the past year.

The government will announce measures today to help homeowners facing difficulties with repaying their mortgages.

The European Central Bank left eurozone interest rates at 4%. The ECB faces higher inflation than in Britain so is even more reluctant to cut borrowing costs.

Full story posted here.

Labels: Bank of England, ECB, Housing market, IMF, MPC, property prices, RICS, UK Interest rates