Commercial property investment in Britain is expected to rise for the first time in two years, writes LAURA BUXTON

AS THE mercury rises, is Britains property market also on the up? Will the credit crunch soon be a distant cloud? There are of course plenty of statistics to make or break such a case. I begin with the residential market.

If consumer and investor confidence is on the rise, this should first show itself in the residential markets. There are some slightly mixed signs that this may be starting to show.

The Revenue reported that completed house sales in the UK rose again in May to the highest level since October 2008. Despite fewer sellers coming to the market, new buyer enquiries increased for the seventh month in a row in May, the fastest rate since 1999, according to the Royal Institution of Chartered Surveyors.

According to Nationwide, UK house prices rose by 0.9 per cent in June, the first rise since December 2007, helping reduce the year to date rate of decline to 9.3 per cent from 11.3 per cent at the end of May.

Some of the good news may be down to lenders. There is evidence, in the residential market at least, that some financial institutions are beginning to lend again, at least to borrowers who meet their criteria. Record low base rates and recovering bank balance sheets have stoked the flames too. Combined with less aggressive repossession policies under government pressure, there is some cause for hope in the residential market.

However, it is not all sunshine and Pimms. Much of the price stabilisation witnessed recently may be simply attributable to a lack of supply. People are reluctant to sell their homes in a weak market and prefer to hold off until things pick up.

As economic output recovered and growth spluttered back into positive figures through April and May, the commercial market has also hinted at signs of recovery.

There have been some reasonably major investment deals reported: a number of City and West End office buildings have been sold at prices which suggest the buyers will benefit from yield shift before too long. A number of apparently good judges are calling the bottom of the market.

Stelios’s Easyoffice operation is reportedly searching high and low for new outlets. NewRiver Retail Limited recently applied for admission to AIM, seeking £250 million to “capitalise on the significant and rapid fall in capital values in the retail sector”.

Nick Leslau’s new vehicle Max Property Investment has successfully floated and its shares stood at a 10 per cent premium to the cash it holds before it has even done a deal. Major UK buyers are definitely positioning themselves to buy with equity at the ready but still struggling to find the levels of debt they need.

There are signs that things are easing a little with the banks. Even in the last week or two our firm has helped several clients resolve impasses with their bankers who were trying to call loans in and/or to escape from commitments to lend further money. This is probably just the start of a long process of rehabilitation the banks need to go through.

One further interesting sign: two groups of successful investment agents jumping ship (not pushed, we believe) to form new practices at what they consider to be an ideal time.

It is undoubtedly too early to make predictions. Too many dynamics are at play: some short-term market reactions and corrections, other more lasting shifts in culture shaped by so many fingers being burnt in the last 10 months or so. Having said that, a consensus is emerging among market experts that commercial property investment will have risen in the second quarter of this year when the final calculations are made. This will be the first increase in two years, pointing to a far sunnier outlook in both the commercial and residential sectors.

Uncertainty still surrounds the autumn market. Improvement is expected to be gradual. It will depend on a delicate balance of availability of credit, employment figures, earnings, supply, demand and individual circumstances. While we may not be set for record highs in this property market, we should certainly try to enjoy the sunshine in the knowledge that the darkest of the storm clouds may have passed.

Laura Buxton is real estate lawyer with Manches LLP, London