Capital Economics has predicted that the banks of UK may lose up to 7 billion pounds from the declining value of the shop, industrial and office buildings stock of the country over another two years. Also, it states that the write-offs could rise to about 18 billion pounds if the country’s economy slides into recession. It is said that the lenders and investors of nearly 450 billion pounds of commercial property are affected by the fall of about 15 percent in the price of the properties since last June.

The bearish warnings of Capital Economics have had an impact in the sales and rental demand of buildings. Capital Economics also predicts that the prices of the properties may fall further up to 30 percent by next year. Banks have typically loaned their borrowers an amount equal to 80 percent of the value of the property. So, if the fall in property prices continues for another year, many investors may have to repay larger amount within shorter period and hence may find it difficult to refinance their debt. This in turn may force the bank lenders and owners of mortgage backed securities to face losses to the tune of 7 billion pounds as the investors may tend to sell their properties to meet the huge repayment demands.