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29/12/2008
Losses on commercial property loans 'expected in 2009' |
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British financial institutions are facing up to £70 billion in losses on commercial property loans, it has been predicted.
This is according to the latest predictions from investment bank Close Brothers, which has estimated a 50 to 60 per cent slump in the value of commercial property by the end of next year.
These figures are in comparison to a peak which occurred in 2007.
Gareth Davies, managing director for Close Brothers' restructuring division, stated: "Commercial property is a major issue facing the banks during the next couple of years. We believe the scale of the problem has not been built into the recapitalisation programme developed by the UK Government."
The organisation's predictions are based upon research conducted by De Montfort University, which found that UK banks have around £250 billion tied up in commercial property loans.
This news comes after David Parker, national head of rating at Savills, stated that the value of commercial properties is likely to fall due to an increasing number of empty premises and businesses struggling to stay afloat.
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