The Finance Market:

The high profile problems being experienced throughout the financial world continue to be a preoccupation for the whole business community.  The Bear Stearns situation earlier this year, the rumours surrounding other banks and the stubbornly high costs of borrowing despite the Treasury’s best intentions have done nothing to quell these fears.  However, even with this background, King Sturge is reporting that there is still activity in the Market.

“Predictions at the beginning of the year were all consistent in recognising that property would not see rising returns in the short term and there was, and remains, much uncertainty about when the decline in property values will end” reports Peter Clarke, Head of Commercial Valuation at King Sturge.

“However, despite further reports of a tough year ahead, and a number of property companies and consultants continuing to issue profit warnings and experiencing plunging share prices, our recent levels of activity show that there are banks still willing to provide finance for debt purchases.”

“There is no doubt that a number of property lenders have stepped back from the funding market, but others are exploiting the opportunities which this has created.  These tend to be the traditional, diversified asset backed banks.  Whilst in many cases their terms and margins may be different, their continued presence in the market is good for the economy.

”It is not simply a matter of offering a potential deal to a range of banks and sitting back to see who will offer the best terms.  With fewer, more choosy lenders in the market it is essential that a loan proposition is presented in the best possible way to a bank, with a workable structure behind it.  The strengths, weaknesses, opportunities and threats to a property need to be addressed.  “We are getting involved with funding deals at an early stage to provide detailed property advice and thereby support proposals” reports Peter Clarke.  “In the property market as a whole, there has tended to be a “flight to quality” with well located and specified properties being in most demand, and this is mirrored in the banks’ approach to lending.  It is the messier deals which require more thought at an early stage”.

Going forward, there is continuing uncertainty regarding the market and as to what 2008 and 2009 will hold.  The latest King Sturge survey carried out amongst European investors and bankers, who control funds worth over £300 bn, found that whilst the UK was ranked first in the best locations presenting market opportunities in 2008, it was also ranked third in the worst locations.  This reflects the wide range of opinions from investors with some saying that the market has touched bottom whilst others are expecting the decline to continue for a further 18 months.  Transaction volumes have undoubtedly declined in recent months and this is likely to continue for some time to come.  This is a challenging environment for valuers to work in.

“King Sturge’s multi-disciplinary approach to business means that the Valuation Team does not work in isolation, but works alongside the investment, occupational agency and planning departments to ensure that clients get to the most accurate advice possible.  We view this as our key strength and it is paramount in these uncertain times.”

Read the full King Sturge report on empty rates, industrial, residential, retail and office valuation in 2008 below:

Property Market Valuation Bulletin - 2008 PDF

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