Inflation is back - let us hope Bank of England does not panic

摘要

Inflation is back with a vengeance, driven by the surge in energy and commodity prices. The futures markets tell us that prices will continue on their upward trajectory over the rest of 2011, which could be a problem for property because of the scale of refinancing risk. Figures compiled by DTZ estimate that outstanding debt in global commercial real estate is around $6.8 trillion, most of which is in Europe and the US. Of this, around $2.4 trillion matures in the next two years. The collateral for much of this debt is worth less than the outstanding loan obligations, so any increment in interest rates will expose a huge vulnerability The inflation problem is particularly acute in the UK because first, the energy and commodity price effects have been compounded by last month's increase in VAT and by the earlier depreciation of sterling against the world's leading currencies and, second, the UK's commercial property market is both large and overloaded with debt.