Property values 'will drop 25%' - commercial mortgages

09 December 2008

Commercial property values will fall by a quarter over the next two years but will begin to recover in 2011, a new report has suggested.

Values for business premises will decrease by 25 per cent over the next couple of years due to a "sharp drop" in rents, according to the Royal Institution of Chartered Surveyors' (Rics) commercial property forecast.

This could be beneficial for those looking for commercial mortgages as the cost of buying a property will be cheaper.

Rics estimated that the market will experience a 16 per cent decline in capital values in 2009 and an additional fall of up to 10 per cent in the following year.

But the downturn should begin to reverse in 2011, the organisation predicted.

Senior economist Oliver Gilmartin said: "Stimulus plans by central banks worldwide and accelerated fiscal packages might see a return to higher inflation once the worst of the current slowdown has passed."

One such plan was put into action last week by the Bank of England, which cut interest rates to two per cent in a bid to boost the economy.