The Property Industry Alliance (PIA) seeks to give the commercial property sector a more coordinated and effective voice on issues such as policy, research and best practice.
Latest news: Press release Tuesday 7 November 2017
UK property industry launches quarterly metric to warn lenders and regulators when price rises should signal lending curbs
- By understanding how overvalued property is relative to trend, banks and regulators can act to cut exposures
- Aim is to cut lending risks at market peak by providing early warning system. Current values 10pc above norm
- Adoption of metric by lenders and regulator will reduce risk to the UK financial system, say experts
Property chiefs have launched a new metric to sound an early warning for lenders and regulators when commercial real estate (CRE) values lurch too far above long-term norms.
The adjusted market value (AMV) metric – one of three that was proposed – is effectively a percentage determination of how overvalued UK commercial property is. It has looked back over previous cycles, crunching data to work out how far values could go before a market crash becomes almost inevitable.
The move follows a series of research papers and is designed to allow regulators to rein in lending when the market gets too frothy – while helping banks better understand the risks they take at various points in the property cycle.