He said “Essential indicators show some improvement in the commercial property market, but these are mainly restricted to prime assets in the City & West End. There is little evidence that this is percolating out to the wider market. Although tenant demand appears to be stabilising there will be no meaningful improvement until there is an improvement in access to funding.”
Whilst the Bank of England Credit Conditions Survey showed some improvement in overall credit availability this was mainly restricted to secured household credit. Lending to small businesses and to the commercial real estate sector fell again and lenders reported an expectation that it would continue to fall in the 3rd quarter also.
Stuart Parfitt continued “ There is an understandable risk aversion amongst the banks, especially those who over expanded at the peak of the market, but the irrational exuberance of the bubble years has turn to an irrational pessimism now the market has corrected and is at or close to fair value. However I don’t expect this to change. What I still find hard to understand is that the Treasury and the Bank of England is not using the quantitative easing programme more effectively to actually increase access to credit, and not just lowering the cost of capital to our already over subsidised banks. Whilst their remit is slightly different, in Europe the EBRD regularly seeds investment funds with relatively small amounts of money (€10-30m), that have a swift, direct and meaningful contribution to economic stimulus. We have and will continue to implore the Bank to follow the lead of the EBRD with their inspirational investment programme. A similar Bank of England led programme designed to make access to funding easier would be a major step in reconstructing the battered UK economy. ”
