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News Release

London

UK Base Rates Remain Unchanged at 0.50%

Jones Lang LaSalle Reaction


London, 10th December 2009 - The Bank of England has kept base rates on hold at 0.50% for the ninth consecutive month in December and left its quantitative easing (QE) programme at £200 billion, after extending it by £25 billion last month. The Bank of England has not ruled out further extension to its QE programme and last month’s Minutes indicate that at least one member of the MPC favoured a further £40 billion increase, based on risks to growth greater than those highlighted in the latest Inflation Report. While it is unlikely that the economy will suffer a serious relapse early next year, the underpinnings to growth outside of the massive public stimulus programme remain fragile and sparse.  Finally, the Bank of England has stated that base rates are likely to maintain at the current level for the most part of 2010.

UK residential property

James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle, said:

 “House price growth has strengthened further in the most recent months, with the Nationwide index recording a 0.5% increase during November. The pace of house price increase, however, is slowing down with the three-month on three-month comparison showing the rate of increase moderating to 2.8% in November from 3.5% in October. Similarly, the number of new mortgage approvals and the new buyer enquiries have started to slacken slightly heading into the end of the year.”

“We anticipate that mainstream prices are likely to fall again next year as the current shortage of properties for sale is expected to be reversed next year and demand for housing will be hit by rising unemployment and weak household finances.”
 
UK commercial property

Paul Guest, Head of EMEA Research at Jones Lang LaSalle, said:

"The tentative pickup in the economy has led to a cautious improvement in occupier confidence. This is reflected in increased activity across many of the major markets of the UK but has not yet been reflected in a marked pickup in leasing volumes. That said, improving sentiment has served to create a more stable backdrop against which corporate strategies have been devised, facilitating a more forward looking stance. Cost containment will remain important but the emphasis will be less on short term gains and more about achieving value in the medium term." 

“The strong demand from retail funds, REITs and overseas buyers for UK commercial property has contributed to a rapid fall in prime yields over the past two months. Given that there is no 'natural selling constituency' at the present time, we expect this trend to continue in the short term even allowing for the weak economic situation. We expect a more balanced market to develop in 2010 as the higher prices allow a range of current owners, including banks, to bring a wider range of assets to market. We do not, however, expect a flood and investors will continue to concentrate on selecting individual asset which offer an angle, be it on the building itself, the location or tenant, which offers the most value in the medium term.”