Commercial property values could fall by as much as 15% as interest rates rise and the threat of recession looms.
Schroders’ head of UK real estate investment, Nick Montgomery, has said that the full impact of the rise in borrowing costs has yet to filter through to official data, but transactions are already showing that investors are already becoming more cautious about price.
Five-year swap rates, used to determine finance terms for borrowers fixing debt, have risen to 3.6%, from 2.45% in August and 0.55% in September last year, Montgomery noted.
Based on higher swap rates and a slowdown in consumer spending, property values are likely to be 15% lower at the end of next year than they were at the end of last year, he said.
