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News Release


UK Base Rates Left Unchanged at 0.50%

Jones Lang LaSalle Comment

London, 8th April 2010 - The Bank of England kept base rates on hold at 0.50% for the 13th consecutive month in April. Given the weak economic backdrop and a reduction in the headline inflation rate, we expect interest rates to remain unchanged in the short term, whatever government emerges after the election. The Quantitative Easing (QE) programme was left unchanged at £200 billion; although the Bank has left the door open to extending QE in the future if the economic recovery which got underway in the final quarter of 2009 loses steam in early 2010.
UK residential property
James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle, commented:
“The residential market saw positive news this month, with Nationwide reporting house prices rising by 0.7% across the UK in March.   The recent Budget, on one hand, provided assistance to first time buyers with a stamp duty waiver on residential properties up to £250,000 but at the expense of a new 5% stamp duty banding from next year for residential properties in excess of £1million.”
“All eyes are now towards the Election and the outlook for fiscal planning.  The backdrop of the underlying economic conditions, in conjunction with a predicted rise in unemployment, is likely to dampen price growth and the concern of rising interest rates later in the year will continue to weigh on the market which has performed well recently largely due to a limited supply of property for sale.”
UK commercial property
Paul Guest, Head of EMEA Research at Jones Lang LaSalle, said:
“In the absence of strong economic growth, medium term occupier demand will be driven by lease events rather than expansionary plans.  Looking ahead, the demand for new space is expected to increase but will remain subdued in comparison to long term averages.  Markets generally offer a wide range of choice to occupiers through to the end of 2010, before severe pipeline constraints occur.  However, the window of opportunity, particularly for occupiers seeking good quality space or larger floor plates, will begin to close very soon as a diminished supply pipeline starts to effect a hardening of market conditions."
“Meanwhile, we expect demand in the investment market to be driven by retail funds, REITs, and overseas investors. We expect SWIP, Aviva, AXA, Henderson and L&G among others to be substantial net buyers on account of strong cash inflows. Opportunity funds such as Blackstone and AEW will also be active targeting properties with asset management opportunities. Given this strength of demand we expect yields to remain under downward pressure over the first half of 2010.”