PROPERTY RECOVERY UNLIKELY BEFORE 2010 - RICS ECONOMIST TELLS UK200GROUP CONFERENCE

How long can recovery take? 'This looks like being an extended economic downturn, with no recovery in growth until 2010,' Oliver Gilmartin, senior economist at RICS, told Property and Construction Group, part of the UK200Group of quality assured Accountants and Lawyers in London on Friday (24th October).

'Years of easy money had spawned financial innovation and in particular growth in the securitisation market. When the property market started to turn, banks became worried over each others exposure. The collapse of Lehman Brothers intensified the situation, prompting concerted government action to avoid a depression.

'Rent expectations are now negative. The real economy is suffering as banks are increasingly risk averse and loan officers are continuing to tighten lending to businesses. The same is true of lending to households.'

The rapid change in lending standards, said Mr. Gilmartin, had depressed the property outlook. 'The construction sector had been one of the biggest casualties. House building is falling off a cliff. Housing starts are set to fall below 100,000 in England. The credit crunch has had a huge impact on commercial real estate finance.

'The collapse of CMBS has had a bigger initial impact on property investment in the UK, causing UK commercial property transaction activity to plummet. The credit crunch had triggered a sharp fall in tenant demand in all sectors. Rent expectations are negative and continuing to worsen.

Globalwise the good news is that oil prices are falling. The bad news is that the US economy is set to weaken further, and the US housing market is still some way from stabilising.

David Ingall, President of UK200Group comments ‘Confidence needs to return before the construction and property market sees an upturn. But the pressure of housing needs may well alter the attitudes of both the general public and the industry. Over the past 15 years credit has been relatively easy and it will take at least two years for business and the general public to adapt. The role of our accountancy and legal members in seeing SME businesses through this massive change will be vital.