A rise in interest rates would “kill everything” in the commercial property market, a Birmingham surveyor has said.
Rory Daly, the managing director of chartered surveyors and auctioneers Bigwood, said putting up rates would cause more trouble than any tax measures the Government could take.
Interest rates have been at a record low of 0.5 per cent for some time, but there have been hints that this figure could go up.
Mr Daly said: “I don’t mind if they put taxes up, I can live with whatever they do on capital gains, but please do not raise interest rates. We simply could not cope.”
Andrew Sentance, one of the members of the Bank of England’s monetary policy committee, said the Bank’s expansionist policies could not last forever in the face of rising inflation.
The Bank has been reluctant to raise rates because of the fragility of the economy and because of forthcoming tax rises and public spending cuts. Governor Mervyn King said last month that he believes inflation will fall back to target “within a year”.
It dipped more than expected to 3.4 per cent in May from a 17-month high of 3.7 per cent in April.
However, the Organisation for Economic Co-operation and Development has said the Bank should wait no longer than the final quarter before acting and expects interest rates to reach 3.5 per cent by 2011.
But Mr Daly said: “The one thing that would destroy what little is left in the property market would be an increase in interest rates. At present rate levels the market is struggling. The authorities can do what they want elsewhere in the economy but they need to keep interest rates down. Otherwise it would kill everything.”
He said there had been some limited improvement recently as those with cash decided to re-enter the market around the turn of the year.
However, Mr Daly added that with bank lending still restricted, deals were foundering because of a lack of liquidity.
