The Real Estate Finance Group has revealed its final recommendations to minimise the impact of the next real estate crash on the broader economy.
Sponsored by the Investment Property Forum, the group of some of the most senior bankers and financial figures in the industry has published its paper A Vision for Real Estate that calls on property to make radical changes.
At the top of its list are the establishment of a loan database that the regulator could use to gain an overview of real estate lending across the UK and the introduction of long-term value measures for risk management, in addition to existing market valuations.
The group, chaired by finance director at Grosvenor, Nick Scarles, also calls for the regulator to have greater access to expert interpretation and analysis of market information; the introduction of a commercial real estate finance qualification in conjunction with the RICS; better risk differentiation in regulatory capital requirements; the encouragement of diversity in terms of the types of lenders in the market and the introduction of market governors, which gradually restrain lending as the market gets overheated, rather than regulatory “switches” with “on” and “off” settings.
Scarles said in his foreword:
“A vision without action is useless. The group having used the passion, knowledge and experience of its members, as well as those who have contributed to the vision through dialogue with members of the group, to produce these recommendations, must now pass responsibility for action to the regulators, lender and other market participants with the power to implement them. The group sincerely hopes they will take this opportunity in the interest of financial stability and the economy, and remains prepared to assist with implementation as best it can.”