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Threat of Recession Weighs on UK Property Market

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United Kingdom  Ireland  real estate sector  Phil Tily  IPD  Commercial Property Performance  negative gross domestic product  retail real estate assets 

Threat of Recession Weighs on UK Property Market

By - Tuesday 24 January 2012

A marginal decline of capital value growth in the UK's commercial property sector was recorded in December, new figures show. The IPD Monthly Index revealed the rate of appreciation of such real estate assets slid by 0.1 per cent last month and now stands at 1.2 per cent. Meanwhile, income return reached 6.8 per cent. The total return on commercial property investments in the UK was 8.1 per cent in December, the IPD data noted, with all three market sectors - offices, retail and industrial - hit by the downward trend.

Managing director of the UK and Ireland at the organisation Phil Tily commented: "During the last three months of the year, as the euro situation worsened and the threat of recession increased, returns tailed off considerably." He added that offices were the only property class that remained in positive territory, despite the difficulties, although stressed the 0.2 per cent level of growth "represented a considerable slowdown".

Mr Tily stated much of the optimism about the performance of the UK's commercial real estate sector that was present at the start of 2011 has now gone, with expectations for this year adjusted accordingly. He said: "2012 may be a year of re-evaluation in regards to pricing levels, and a heavy concentration on income." Meanwhile, the Centre for Economics and Business Research (Cebr) released figures this week that indicate the UK is already in a recession.

According to the Cebr forecasts, the country recorded negative gross domestic product (GDP) growth in the final quarter of 2011 and this is set to continue in the first three months of this year. The organisation has also revised its predictions for the UK's economy, shifting from 0.7 per cent GDP growth to a decline in GDP of 0.4 per cent by the end of 2012 - with the potential for this to fall further "if developments in the eurozone are especially negative".

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