Following a recent report which found that UK commercial property prices have rising slightly, Morgan Stanley have warned that there will likely be a second stage to the decline, indicating that the end is not yet in sight for London’s already badly-damaged commercial property market.
The global financial services firm suggested that a further dip would be necessary for the recovery of the banks, which rely heavily on such assets.
The ‘unwinding’ is expected to be gradual, beginning after the government’s Asset Protection Scheme is finalised in the autumn.
Two banks bailed out by the taxpayer, RBS and LloydsTSB, will have to make a particular effort to unload property as they seek to scale back. The report by Morgan Stanley expects them to remove £15 billion from the sector every year for the next five years as they seek to reduce their exposure to the sector.