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News Release


UK Base Rates Left Unchanged at 0.50%

Jones Lang LaSalle Comment

London, 7th October 2010 - While the Bank of England’s Monetary Policy Committee kept the base rate on hold at 0.50% in October, this months real market-moving insight will come from the government’s Comprehensive Spending Review (CSR).  In light of the Housing minister’s comments around the ‘very harsh realities’ for the housing sector all eyes will be on the announcement, expected on 20th October.

UK Residential Property
Rob Bruce, Head of Residential Research at Jones Lang LaSalle, commented:
“Much of the housing sector appears to have ground to a halt awaiting the implications of the Decentralisation and Localism Bill.  The latest monthly house price figures from Nationwide were virtually static month-on-month, following two consecutive monthly declines – the first back-to-back declines since the start of the market recovery in February 2009.  Wider measures of activity in the market reinforce this slow down: the supply of new stock to the market dropped 0.7% in September, according to Find A Property, and the level of mortgage lending reached £11.4 billion, a decade long low for August, according to the Council of Mortgage Lenders.”
“We continue to see a two-tier residential market.  Property in London continues to attract international investors, playing on the currency gain and long-term potential of the capital; likewise indices show City job creation in the financial services sector headed back towards the peaks of 2007.  Opposed to this, the wider picture across the UK sees a drop in housing demand with the austerity measures and threat of unemployment damaging buyer confidence.”
“In the short term, the Bank of England’s decision to keep interest rates low does thankfully relieve the payment pressure on borrowers – this could be particularly important as the market prepares for tough months ahead.”
UK Commercial Property
Stephanie McMahon, Director of UK Research at Jones Lang LaSalle, said:
“The current public spending review and the knock on effect to private spending will do little to assuage fears that the recovery may be stalling.  Occupier activity across all sectors remains patchy with polarised retailer activity and office tenants being driven by consolidation and a need to churn the occupied portfolio or upgrade the quality of space.

With no single sector likely to drive growth and a lack of expansion on the corporate agenda, take-up is expected to be broadly in line with long term averages. Lack of quality space continues to be a trend across many markets and a significant return to speculative development is unlikely in the medium term. With most investors still highly risk averse and speculative development finance still absent, the
repositioning of Grade B space to Grade A via refurbishment remains an alternative lower cost and lower risk option.”

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