When a butterfly flaps its wings, at some point further down the line it causes a tornado. So, at least, goes that part of chaos theory.
For property funds, the butterfly flap was the mini-budget. Almost immediately, bond yields rose in response to elevated interest rate and inflation expectations. Within just a few hours the cost of borrowing became noticeably more expensive, drying up the market for commercial property.
For the most part, this market relies on would-be buyers being able to access reasonably priced finance. An unintended consequence of Kwasi Kwarteng’s Commons statement was that “reasonable” prices disappeared from the market soon after he sat down.
“The turnaround [in the commercial property market] has been phenomenal since the mini-budget,” one industry veteran said.
