In a speech to the British Property Federation, the Governor discusses the ways in which stable non-inflationary growth is likely to change the role of property in the UK economy. During the post-war period, residential property has come to be viewed as a form of saving with high returns, while commercial property has been valued largely for its investment qualities as a financial asset. But once low inflation is seen to be firmly established, the Governor argues that the role of property in all investment portfolios, whether of householders or of other forms of collective savings, will be evaluated on its own merits rather than as a store of value or as a means of speculative gains in inflationary times. He suggests that the benefits of a low inflation economy would include a revival of the rented residential sector, thus channelling more savings into productive investment, and notes the need to review particular aspects of long lease contracts, such as privity and 'upwards-only' rent review clauses. Looking to the future, the Governor does not expect a rapid recovery in the property market. But he urges that we must not allow inflation to be the route by which values are restored. One way of helping the recovery and of encouraging a more efficient market would be to improve the availability of consistent comprehensive data on the property markets.
The role of property in our economic life