The level of maturing debt, almost twice the level of George Osborne’s public expenditure cutbacks, will hit the commercial property industry’s ability to fund itself and support the UK economy, delegates at the conference were told.
Phil Miller, chief executive of Miller Developments, said: “Very conservative estimates suggest that debt available to UK commercial property will contract by around £60bn over the next five years. When one considers that the Comprehensive Spending Review proposes cuts over a similar period of £81bn from the entire economy, this removal of credit is clearly a massive issue for both the industry and the economy as a whole.”
Liz Peace, chief executive of the British Property Federation, said: “Few industries have been hit as hard as the property industry by the onset of the credit crunch and the banks are now reducing their exposure to real estate.
“There is a rapidly approaching funding gap as £160bn of debt is due for repayment in the next five years with little thought on how to refinance this backlog or how the property industry will fund itself in the coming years.”
The SPF is also warning that the financing ‘black hole’ will only increase the polarisation between London and the South East and the rest of the UK.
David Melhuish, director of the SPF, said: “Whilst prime commercial property in London and the South East looks fairly robust, the story for the rest of the UK is far less rosy.
“The property debt will make finance difficult to come by and in this context the public capital expenditure cutbacks raise a genuine concern over future levels of public investment in the Scottish economy.”
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