A further quarter per cent rise in interest rates will lead to a general decline in the number of commercial real estaste transactions in the UK over the next 12 months, according to a survey of 400 property professionals by investment bank Investec.

A further quarter per cent rise in interest rates will lead to a general decline in the number of commercial real estaste transactions in the UK over the next 12 months, according to a survey of 400 property professionals by investment bank Investec.

Conducted earlier this month, the survey revealed that almost two thirds (63%) of respondents believe a quarter per cent rate rise will reduce the number of deals by 10%, while a third (34%) think that the decline could be nearer to 25%.

'The extent to which the market can continue to withstand interest rate increases without suffering a tail off in deal volume is a moot point but most respondents believe that the tipping point will be another quarter point rise, which is likely to be introduced before the end of the year,' said Paul Stevens of Investec Private Bank's structured property finance team. 'The bottom line is that buyers will have to source more equity as they will find it increasingly hard to borrow as much debt as they have in the past and thi will inevitably lead to a reduced number of transactions.'

Investec's survey also found that 64% of respondents believe that some banks have relaxed credit standards with regard to financing property deals. Of these, nearly half (48%) believe the main reason for this to support their banks' securitisation platforms. 'Despite rising default rates, the findings suggest that there is a widely held perception that banks have been eager to finance property transactions in order to feed their securitisation platforms,' Stevens said.

According to research by Barclays, the outstanding volume of European commercial mortgage backed securities (CMBS) as of mid-year 2007 is estimated at EUR 159 bn.