Rising interest hits commercial property deals in Britain

Commercial property deals in Britain collapsed to the lowest level in more than a decade as investors were rattled by rising interest rates and the prospect of a prolonged recession.

7 billion pounds sterling

Deals were worth £7bn in the last three months of last year 2022, the lowest quarterly total since at least 2010.

Investors spent £21 billion on UK commercial property in the first three months of 2022, £17 billion in the second quarter and £11 billion in the third quarter.

High interest rates

According to real estate analytics firm "CoStar", which began collecting data that year, commercial property owners have struggled with higher interest rates, as investors now have to put up with much higher borrowing costs.

  Low commercial real estate prices

UK commercial property prices have fallen by more than 15% since June 2022, according to the "CBRE” real estate agency's index, and most analysts expect them to continue falling in the near term.

It is noteworthy that last September, economists in Britain warned of a "catastrophic collapse" in real estate prices in the country, due to the successive economic developments, especially the significant rise in interest rates and the government's new economic plan.

Control inflation

  A report published by the British newspaper "Daily Express" said, "The Bank of England's attempts to control inflation make an increasing number of analysts concerned about a sudden correction in the real estate market."

Concerns have grown that rising borrowing costs will affect the number of people looking to obtain a mortgage, which is the lifeblood of the UK property market.

And interest rates were raised a few days ago to 2.25% from 1.75%, the seventh rise in a row, as the bank grapples with the current economic uncertainty, prompting many experts that there may be a “significant drop” in prices, according to what I quoted. Daily Express".

A number of banks have already put mortgage deals on hold for new customers, and many are now back on the market at much higher rates.

Some banks have also resorted to raising interest rates on five-year fixed-term mortgages by 75% to a range of 5% to 5.5%, with nearly 6% for new mortgages, which is about 200 basis points more than average rates for comparable mortgages, last August."