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News Release

London

UK Base Rates Remain Unchanged at 0.50%

Jones Lang LaSalle Comment


London, 10th May 2010 - The Bank of England has kept base rates on hold at 0.50% as it has done since March 2009. There was also no change to its Quantitative Qasing (QE) programme which remained at £200 billion. The Bank of England noted in the last month’s minutes that there were some upside risks to inflation and these will be explored in its latest Inflation Report which is published later this week. The minutes also commented on the risks to the economic recovery in continental Europe which have been brought into sharp focus in recent days as the European Central Bank formulated a rescue package in order to allay fears over the sovereign creditworthiness of certain members of the Eurozone. Whatever government emerges from the post-election discussions they will have to nurture the UK recovery in this difficult environment, and interest rates are likely to remain at 0.5% in the short term.
 
UK residential property
 
James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle, commented:
 
"In a market gripped by the closest fought election in recent memory the housing industry will welcome the stability of the base rate being held at 0.5% for the 14th consecutive month. While the outlook for the UK economy is improving it would be far too early to contemplate raising interest rates, and as a consequence, risk derailing the housing market recovery."
"Market data shows improvement, but the resurgence remains fragile: average house prices rose 1% in April according to the Nationwide index, bringing the annual rate of growth to 10.5%. Although subsequent Halifax data reported a contradictory fall of 0.1% in the month."
 
 "Statistics from the Bank of England this month show a 2.9% rise in mortgage approvals, allied to a 4% rise in the British Bankers Association measure of new mortgage lending. This illustrates that consumers are starting to demand more credit, lending however remains historically low. During this phase of election uncertainty the market will respond well to the consistency of the Bank of England decision."
 
UK commercial property
 
Paul Guest, Head of EMEA Research at Jones Lang LaSalle, said:
 
"Signs of economic recovery are beginning to drive improvements in take-up, but medium term demand remains moderate. In the absence of strong economic growth, tenant demand is expected to increase only modestly on 2009, driven largely by lease events, portfolio churn and corporate activity rather than expansionary plans."
 
"Occupiers remain cost conscious and new requirements are likely to have a neutral or negative impact on net absorption as occupiers consolidate and realise space efficiencies. Developers remain hesitant about committing to new space, with the result that completions activity is beginning to decline from the cyclical high of 2009. In some markets we are already seeing shortages for certain product types and sizes."