The property sector will take a further beating in the next two years as the current financial crisis deepens, but it will rebound from before the rest of the economy, according to Roger Bootle, managing director Capital Economics. 'Rents for commercial property will fall and we will see further falls of capital values. But this sector is early on in the recovery process. It has fallen faster and we will see activity and prices rebounding before overall activity in the wider economy.'
The property sector will take a further beating in the next two years as the current financial crisis deepens, but it will rebound from before the rest of the economy, according to Roger Bootle, managing director Capital Economics. 'Rents for commercial property will fall and we will see further falls of capital values. But this sector is early on in the recovery process. It has fallen faster and we will see activity and prices rebounding before overall activity in the wider economy.'
Speaking at the ULI annual conference in Paris last week, Bootle said he expects interest rates will remain low, leading to a zero rate effectively for the next two years or more. Bond rates will also be very low, he predicted: 'The effects on the cost of capital and yields will favourably affect comparisons towards property.'
At the same time, Bootle sees a number of forces that will bring recovery to the wider economy, pointing to falling commodity prices and moves to boost purchasing power. There are also enormous amounts of money on the sidelines, he added, saying he foresees a surge of corporate investment from China in the US, the UK and the eurozone. 'For the immediate future, there is a need to prevent disaster, but at some point we will return back to normal.'
