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Lloyds sees no improvement in the UK’s property markets in 2010

LONDON: Lloyds Banking Group Plc, the UK’s largest real estate lender, said that the current increase in UK property prices is unsustainable, as it announced plans for a £21 billion (RM117.75 billion) rights offering.

Values of UK homes, shops, offices and warehouses will stagnate next year, the bank forecast, as it predicted its own provisions would be “significantly lower” in 2010.

“We currently expect residential house prices to be flat in 2009 and 2010,” the London-based bank said in the statement. It added that commercial real estate values would also be little changed next year after falling 15% in 2009.

The UK’s largest residential mortgage-lender’s forecasts will have an impact on its willingness to lend following a rally in home prices since the first quarter. Lloyds is also the second-largest commercial property lender. In August, the bank predicted that house prices would rise 2% in 2010.

A shortage of properties for sale has lifted home prices as mortgage-lending gradually recovers from its weakest levels since the liberalisation of the loans market in the 1980s. Lloyds own index shows home prices appreciated since April after falling 23% since August 2007.

In the commercial property market, prices climbed in September by 1.1%, the most in more than three years and after a two-year decline erased 44% from building values, according to Investment Property Databank Ltd.

With the UK economy mired in recession and unemployment set to keep rising, Lloyds expects provisions for loans to individuals to rise in the second half. – Bloomberg LP
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