Resilient economy will give way to credit crunch

Commercial property

The downturn in the commercial property market gathered momentum in February, according to IPD.

Heightened systemic risk aversion pushed yields up to 6.5%, resulting in a 13.6% y/y fall in capital values. Rents are now growing at 3.3% y/y, which is the first time they have increased below the long run average rate of 3.4% y/y since September 2006.

Construction

The RICS Construction Survey for the first quarter showed a dramatic slowdown in the industry’s growth. Workload growth, while remaining positive, slowed sharply to the lowest level since Q1 1996.

Scotland continues to be the strongest performer, followed by Wales. The North, where workloads are now falling and the net balance is the lowest since Q3 1995, is by far the weakest. Growth in the other regions remains positive, albeit at a slower pace.

Residential property

The weakness in the housing market continues.

On the price front, our own Housing Survey shows surveyor sentiment continued to deteriorate in February.

The net balance of surveyors reporting falling rather than rising prices climbed to 64.1% compared with 54.8% in January. This tallies with some of the actual measures of prices.

Prices have fallen for five consecutive months on the Nationwide measure and six straight months according to Hometrack.

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