Thursday, Jul 22, 2010
Let the unloading of commerical property begin
Telegraph: Watch out, the great £50bn property unload is about to begin
Despite the fastest and deepest commercial property slump since records began – a peak to trough fall of approximately 44pc – there has so far been only limited impairment applied to these assets. That may be about to change. According to a recent De Montfort University study, there is approximately £300bn of banking loans outstanding to the British commercial property market, of which approximately £50bn is in breach of covenant. A minimum of £50bn of property coming onto the market cannot be postponed much longer. This will surely make commercial property prices fall much further and restrict lending due to their losses.
Posted by miken @ 09:31 AM (2330 views) Add Comment
29 Comments
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1. cynicalsoothsayer said...
Ok then, who are they going to unload to?
2. fubar said...
Me, I was hoping for an opportunity to unload my 50bil savings. This is what I've been waiting for.
3. drewster said...
cynic,
You can always find a buyer, if the price is low enough.
4. cynicalsoothsayer said...
Aye, but when the prices get so low, they decide it's better to hang on to it/roll the loan. The shake out occurs when things pick up, and there's real demand for commercial property.
5. This comment has been removed as it was found to be in breach of our Blog Policies.
6. mark wadsworth said...
Splendid. My next venture will be buying commercial property. That way it won't affect me when we replace Business Rates/SDLT with Land Value Tax because it'd largely be a straight swap.
And when we replace income tax, VAT, corporation tax etc. with full LVT, it will be to my benefit as my tenants will have more money to spend on rent - this change will of course shift the tax burden away from businesses and onto household consumption of land.
7. Craig said...
The banks will not offload all £50b, what they are doing is making companies who are in breach of covenant (LTV) sign up to PPA Agreements.
This is a property participation agreement where the bank take a stake in your property to extend your loan. Its an absolute joke!!!
The banks work out your LTV by getting a current valuation done (Bank select the valuer), they then knock 30% off this value for a firesale value and will only lend 65% against the firesale value.
For example property was valued at £130k in 2007, now been valued by the bank valuers at £100k. The bank set the property value at £70k and will only lend £45.5k against the property....
This is why people are finding it impossible to lend money
8. uncle tom said...
The bit of CP to watch, and possibly snap up at the right moment; is pubs.
Punch Taverns continue to teeter on the brink of collapse, and are probably too big to be taken over by another company.
If they go down we could see the price of pub real estate fall sharply, which could threaten the viability of other pubcos, like Wetherspoon and Greedy King.
There's a chance we could see a national fire sale of pubs, with some exceptional bargains..
(I'm watching carefully - the freehold of a pub or two would top out my pension arrangements nicely..)
9. Mikethe20 said...
Uncle Tom, Waitrose have just announced a strategy to buy old pubs and convert into stores. Tesco are already doing this.
10. alan said...
UT,
Beer and wines are discretionary spend. Meals out are even more so. When the next downturn comes, everyone will be counting their pounds, not working out where to go for Sunday lunch, I suspect.
Wetherspoon currently has a good following among younger drinkers, with a larger disposable income (as they are staying at home with mum, instead of buying houses).
Let me know when you buy - I'll come over for a pint!
11. timmy t said...
Nice to see some of the HPC diehards talking about their plans to cash in on property...
12. mark wadsworth said...
Timmy T, I am not just an HPC diehard but a land value taxer :-) Uncle Fred said house prices would crash end 2007 so I dutifully sold-to-rent. What he did not foresee was the massive bail outs that seem to be working ... so far.
If the government is too stupid to listen to the land value taxers, why shouldn't we cash in? People call me a hypcrite for being a sell-to-renter and LVTer, but a lot of my LVT chums are homeowners, owner-occupying farmers or even landlords or property developers.
13. timmy t said...
MW - so when you say your next venture will be buying commercial property, I am guessing this is because you see a way to make money out of it. Yet when others make money out of it they are evil.... I'm with you on LVT though
14. mark wadsworth said...
Timmy T, it's like the welfare system. In fact, Home-Owner-Ism is a welfare system for the "already wealthy".
I have no personal grudge against welfare claimants for playing the rules of staying out of work if they'd be worse off in work. Neither do I blame people for trying to make money when the opportunities exist.
It is only when welfare claimants talk about "their rights" or "their entitlements" that I get annoyed. Similarly, it riles me no end when the Home-Owner-ists say that their property wealth is a result of hard work and thrift. B0LL0CK5 - it's all govt. decreed handouts. Or when the bankers say we need strong banks to help the economy.
The people I really blame is the government for going along with the charade and refusing to contemplate LVT or liberalising planning laws, or in this instance creating a welfare state that discouarges work and stable family relationships etc etc.
15. titaniccaptain said...
Pubs eh?
Who is going to buy a pub when the pub trade is suffering?
Unless you go for a change of use............
Saying that......good pubs are like gold dust.
Good ale, wine and food is always a winner.....add to that quality music (not your karaoke singers with backing tapes) and you could do very well.
Pubs are also diversifying (like my old local that sells fishing permits etc.) and the concept of what a pub is no longer the boozer it was......shame really.
16. inbreda said...
you socialise with property developers and landlords?!?!?!
Mark - you disappoint me
17. mark wadsworth said...
Inbreda, of course. And with estate agents. What's wrong with that?
18. uncle tom said...
"Who is going to buy a pub when the pub trade is suffering?"
Me. If it's cheap enough..
"Nice to see some of the HPC diehards talking about their plans to cash in on property..."
Of course. That was always the agenda; but only after the market had fallen over, and over-corrected..
19. titaniccaptain said...
@UT
I expect a fine selection of wines on the menu ;-)................what will you call the pub?
The Estate Agent's Arms......
20. happy mondays said...
Drugs, sex , alchohol, gambling, always a winner even in a downturn & of course war ! Nice...
Humans, a very enlightened species?
21. timmy t said...
"Of course. That was always the agenda; but only after the market had fallen over, and over-corrected"
And there was me thinking it was because we all wanted to see sensibly priced houses so we, and our kids, and their kids, wouldn't need to be slaves to a mortgage all our lives.
Makes all those well-reasoned arguments just seem like sour grapes because you weren't getting your way. Trying to talk the market down whilst having a go at others for trying to talk it up. All the time you just wanted to make money and were p155ed off because others were while the market was working for them not you. Slating BTL'ers for making money doing nothing when all you want to do is the same.
Watch out for Pubs under the hammer - coming soon to BBC1. Knock up a few partitions, turn it into flats, couple of coats of magnolia... This time next year we'll all be millionaires...
22. rumble said...
Happy Mondays, "Humans, a very enlightened species?" -- the most animal of all.
Seems there have been wolves in sheep's clothing.
"supremely division"
23. braindeed said...
mw@12 said...
If the government is too stupid to listen to the land value taxers, why shouldn't we cash in? People call me a hypcrite for being a sell-to-renter and LVTer, but a lot of my LVT chums are homeowners, owner-occupying farmers or even landlords or property developer
Everyone is 'too stupid'.....have been for a century.
LVT will never happen, it's just too fair.
24. braindeed said...
timmy t @ 21 said
Makes all those well-reasoned arguments just seem like sour grapes because you weren't getting your way
Bingo. There is a stench of hypocracy in lots of posts here. Everyone is a 'VI' now.
25. uncle tom said...
"There is a stench of hypocracy in lots of posts here"
Not from this quarter - I've been posting here for a very long time, and I've never made any secret about my 'VI'
From a moral point of view, I absolutely agree that house prices should never have been allowed to get so high, and that the over restriction of the availability of development land, and the failure to balance immigration with the supply of housing, has been indefensible.
I'm not looking to profit from a major rebound after prices crash, only to profit from the period of over-correction to a return to sanity.
More importantly, the people I'm out to profit from are not the kids of today, but the smug gits of yesterday..
26. braindeed said...
UT @25 said...
Not from this quarter - I've been posting here for a very long time, and I've never made any secret about my 'VI'
Excuse me UT, I meant no one in particular - the notion that we're all VI's was meant as a sad inditement of how disparate a bunch we have become - Maggie and her 'No such thing as society' construct again ....Bomm Boom
27. rumble said...
"....
I think we have gone through a period when too many children and people have been given to understand"I have a problem, it is the Government's job to cope with it!" or"I have a problem, I will go and get a grant to cope with it!" "I am homeless, the Government must house me!" and so they are casting their problems on society and who is society? There is no such thing! There are individual men and women and[fo 1] there are families and no government can do anything except through people and people look to themselves first. It is our duty to look after ourselves and then also to help look after our neighbour and life is a reciprocal business and people have got the entitlements too much in mind without the obligations, because there is no such thing as an entitlement unless someone has first met an obligation and it is, I think, one of the tragedies in which many of the benefits we give, which were meant to reassure people that if they were sick or ill there was a safety net and there was help, that many of the benefits which were meant to help people who were unfortunate
...."
28. rumble said...
29. braindeed said...
It's the nature of good goverment to provide a framework for people to educate and take care of themselves. To gorge at the trough of self interest and whine while the piglets fall down ill, is the way of the delusional.
Recaptcha .....influence agrarians - for real