Finanze® Daily Digest - 14/10/2022

The Brief: Billions of commercial property values in the UK are likely to be decimated should borrowing costs continue to spiral, according to Goldman Sachs. In its published note, the group warned that a price slump of about 15% to 20% is possible from June of this year until December 2024. Publicly traded property groups will also not be spared from the rout as their portfolio values are projected to decline by as much as 12%.

Why It Matters: An alarming forecast was included by analysts at Goldman Sachs claiming that if current mortgage rates prevail, the cost of borrowing among PLC holders could “rise by 75% over the next five years to more than £700 million”. The continued rise in mortgage costs not only affects enterprises’ expansion plans but also impacts their ability to refinance their loans.

Finanze® Foresights: A year ago, the country’s commercial property market saw capital values rising in the retail, industrial and warehouse sectors. Today, however, negative capital value growth is hammering these sectors brought about by the political instability in Ukraine, higher energy prices and an overall dampened economic outlook. Kwarteng announced last month that the corporation tax will remain at 19% instead of pursing the hike to 25%, in order to boost investment and growth. However, soaring financing costs and the impact of the Bank of England’s (BoE) interest rate increases in the coming months will keep the effects of the corporation tax rise cancellation at a minimal level. Businesses and individuals are thus recommended to consider refinancing their deals before mortgage rates soar even further.

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