Governor of the Bank of England, Mark Carney, has warned that the sharp increase in commercial property values is causing major concerns regarding financial stability, with European regulators closely monitoring the commercial property markets.
According to the Telegraph, Mark Carney told European Parliament that valuations in the commercial real estate market moved “quite notable in a number of jurisdictions”, which required close monitoring.
Mr. Carney highlighted several risks involved, including publicly-traded funds such as unit trusts, which puts investors’ cash together and buy office blocks and other commercial ventures.
He adds: “We are watching some developments, including the developments in the public-traded commercial real estate market … to ensure that’s not a potential amplification channel of financial instability.”
However, Mr. Carney stressed to MPs that there’s no action required to rein in the market and “monitoring makes sense.”
In its latest Financial Stability Report this month, The Bank of England flagged the dangers that have been posed by the commercial property market.
Deputy Governor for financial stability, Sir Jon Cunliffe, mentioned that historically, British banks have taken substantial losses in downturns. Sir Jon says that London prices were the ones particularly stretched, while the FSR said that prime West End offices as “overhauled”.
Mr. Carney also noted that foreign cash had helped push up property prices substantially.
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