The Bank of England says it’s to keep a closer eye on the commercial property market, after values headed toward their pre-recession highs, thisismoney.co.uk reports.
After announcing it will keep watch on Britain’s housing market for any signs of a bubble, the BOE has now said it will widen the scope to include commercial properties as well. This comes after reports claiming ‘signs of some relaxation’ were exhibited in underwriting standards on commercial property loans.
This information was revealed after minutes from a recent meeting of the Financial Policy Committee (FPC) were published. Inside them was the information that commercial real estate transactions reached close to £55 billion during 2013, which puts it almost on par with figures reported prior to the most recent global financial crisis.
The FPC, which monitors potential threats to the economy, claimed that many deals are now being financed without the buyer having to take on large-scale debts – some don’t even have to take out any loans at all. It was said that around three-quarters of all deals which took place in 2013 were financed entirely by equity. Comparatively, this figure was at just one-quarter in 2007.
The minutes, as reprinted on expressandstar.com, read: “Members were concerned that this apparent resilience to past developments in advance economy monetary policy could reinforce risk appetite in a way that did not fully take account of the eventual transition of monetary policy to more normal settings.”
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