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News Release


UK Base Rates on Hold at 0.50%

Jones Lang LaSalle Comment

London,  9th July 2009 – The Bank of England kept its interest rate at a record low of 0.50%, marking the fourth consecutive month base rates were kept on hold. Low interest rates are being supplemented by the Bank’s quantitative easing strategy, aimed at boosting the money supply. This has resulted in approximately £100bn of government bonds and high quality corporate debt being purchased by the Bank with newly-created money. Originally set at £75bn, this was increased to £125bn in May.
UK Residential Property
According to James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle:
“There has been more positive news for homeowners in recent weeks. House prices rose again in June by 0.9%, according to Nationwide. This brings down the annual rate of decline to 9.3%, the first time this has been in single digits since last July, a clear sign that the market is starting to find a bottom with the worst of the credit crunch behind us.”
“Furthermore, mortgage approvals rose again in May to 43,414, the fourth consecutive month that the Bank of England reported an increase in approvals. However, this figure is still much lower than the monthly average level of 95,000 recorded between 1993 and 2008. We are not convinced that house prices have reached the bottom yet. There are still considerable headwinds for potential homebuyers. Mortgage finance is still very hard to come by and the weak economic fundamentals will continue to weigh on the housing market as unemployment rises.”
UK Commercial Property
Paul Guest, Head of EMEA Research at Jones Lang LaSalle commented:
“The unemployment rate continues to rise as businesses seek to contain cost, this will add to the pressure on occupiers to evaluate their real estate needs. Although occupier-controlled space in the market is still relatively low due to occupiers being more circumspect with their expansion over the past few years, we anticipate further supply going forward. If that space is well configured and of good quality it provides an opportunity for those with a lease break or expiry to make a space move, thereby reducing their costs in the coming years.”
“The divergence between prime and secondary markets continues to drive the investment market. Competition continues for assets at the prime end with yields hardening in some cases. Given that there is a scarcity of prime product in the market, this will continue in the short term. The pricing of ‘average’ assets remains unclear, particularly with vacancy rates at record levels in some markets. Our recent Investor Confidence Survey, however, suggests that the pricing correction across the market is mainly complete. Investors and managers will be focusing on maintaining existing income streams as best they can, given the rising level of unemployment which will continue into 2010 at least.”