A new study by investment bank Investec says that the property industry feels that a further quarter point rise in interest rates will lead to a decline in the number of deals being transacted over the next 12 months.
In a poll of more than 400 property professionals, 61% said that a quarter point rise was all it would take to see deal flow slow down. Of those predicting this slowdown, 63% said that they thought the number of deals would decline by 10%. Just over a third said they thought the number of deals being done would drop by a quarter.
Of those who thought a quarter point rise would not be enough to slow the market down, 39% thought it would take a half point rise, 28% thought it would take a rise of 75 basis points, while a bullish 29% thought that a 1% rise would be needed to see deals slow down.
Paul Stevens, head of Investec's structured property finance team, said: 'The extent to which the market can continue to withstand interest rate increases without suffering a tail off in deal volume is a moot point but most respondents believe that the tipping point will be another quarter point rise, which is likely to be introduced before the end of the year.
'The bottom line is that buyers will have to source more equity as they will find it increasingly hard to borrow as much debt as they have in the past and this will inevitably lead to a reduced number of transactions.'
Investec's survey, also revealed that almost two thirds of those surveyed believed that some banks have relaxed credit standards with regard to financing property deals. Of these, nearly half believed the key reason for this is to support the bank's securitisation platforms.