Commercial property ‘could be experiencing a false dawn’

Posted 07/01/2010

Commercial property investors have been warned that current positive signs in the sector may give way to further declines in the medium-term future.

Capital Economics has expressed concern that UK commercial property is to experience a “mini boom” in capital growth which will fade away later in 2010.

It suggested that this is because current conditions could lead to the market once again becoming overvalued, which will lead to falls that could extend into 2011.

The prediction comes in response to a report from King Sturge which stated that 2010 will represent a “false dawn” for the market, when in fact depressed conditions may be set to last until 2012.

Kelvin Davidson, property economist at Capital Economics, concurred with this outlook, suggesting that rising ten-year bond yields will also place “upward pressure” on property yields.

He added: “If anything, the risks to capital values over the next 12 to 18 months, in our view, are more downside than upside.”