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F. T. : " Crash Could Be Even Worse Than 1990s '


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http://www.ft.com/cms/s/0/b89db1d2-8332-11...?nclick_check=1

Crash could be even worse than 1990s
By Jane Croft
Published: October 26 2007 03:08 | Last updated: October 26 2007 03:08
Banks may have experienced a shiver of recollection on Thursday when they read the warnings from Threadneedle Street about growing risks to the commercial property market. Back in the early 1990s, as the recession took hold, many of the UK’s biggest high street banks were badly burnt in
a spectacular property crash
.../

Oooh, yeth pleeeeeeeeeeeeeeeeeeeese! :P

Looks like the FT are wiping the floor with The Sun when it comes to attention grabbing headlines. Too bad the sheeple don't read the FT.

BTW, we can begin to see why the Worldbank website shows the UK as the most heavily indebted nation on the planet with regard to outstanding bank debt (the US is a distant second--very distant):

http://web.worldbank.org/WBSITE/EXTERNAL/D...1805415,00.html

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BTW, we can begin to see why the Worldbank website shows the UK as the most heavily indebted nation on the planet with regard to outstanding bank debt (the US is a distant second--very distant):

Noticed that the US has a large proportion of debt showing under other sectors, compared to the UK

What's under this category ?

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As you point out this article is on the commercial property sector.

Will we see a 90s style crash in residential property? I'm not so sure.

At present, I see it looking like a few years of stagnation and falls in less desireable areas and 1/2 bed new-build flats. Hope I'm wrong though...I could do with a 40% reduction on my ideal home ;)

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Someone with a subscription please put up the full article.

Voila: BTW, this is about COMMERCIAL property....

Crash could be even worse than 1990s

By Jane Croft

Published: October 26 2007 03:08 | Last updated: October 26 2007 03:08

Banks may have experienced a shiver of recollection on Thursday when they read the warnings from Threadneedle Street about growing risks to the commercial property market. Back in the early 1990s, as the recession took hold, many of the UK’s biggest high street banks were badly burnt in a spectacular property crash.

Banks were forced to take huge bad-debt provisions after lending a total of £40bn to commercial property developers. Barclays alone wrote off £1bn in 1993.

Yet, if the Bank of England’s latest assessment is anything to go by, it could be even worse this time. Banks’ exposure to commercial property has reached 9 per cent of outstanding loans – more than the previous peak of 1989-90, it reported.

The investment boom of the past five years has been fuelled by banks’ willingness to lend. In 1999, debt secured on commercial property stood at £49.8bn. By the end of last year it had hit £172.5bn, according to authoritative research.

A report last year by DTZ, the commercial property consultant, showed that speculative lending on property had risen from £11.4bn in 2005 to £15bn in 2006.

Royal Bank of Scotland and HBOS are the strongest lenders to the sector. However, they have been joined by others ranging from building societies to European banks like Anglo Irish Bank and Allied Irish Banks.

The commercial property loan book at Lloyds TSB has also doubled in the past three years, analysts said.

At HBOS, total corporate lending stood at £95.8bn at the end of June of which 35 per cent was in commercial property.

HBOS said on Thursday that it took a long term view on property and that its lending portfolio was underpinned by long-term leases and long-term rental streams.

It also pointed out that the proportion of its loan book dedicated to property has remained stable in recent years – typically within the range of 32-36 per cent of total corporate lending.

There are clear signs that banks’ enthusiasm for commercial property lending has diminished in recent weeks.

Since the credit squeeze started in August, real estate investors have been finding it much harder to borrow against property assets as banks tighten their loan criteria amid the financial markets squeeze. Typical maximum loan-to-value ceilings have dropped from more than 80 per cent two months ago to about 70 per cent, according to some experts.

Until the summer banks could use the credit markets where they have been able to pass on loans in the form of “securitised” bonds called commercial mortgage-backed securities.

However, investors’ appetite for this paper has fallen. Those caught up in the current turmoil can only hope the Bank’s latest prediction does not come to pass.

Copyright The Financial Times Limited 2007

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Voila: BTW, this is about COMMERCIAL property....

Crash could be even worse than 1990s

Until the summer banks could use the credit markets where they have been able to pass on loans in the form of "securitised" bonds called commercial mortgage-backed securities.

This is whats going kill the market the acceleration of credit creation, its already happening in the states where the rate off new credit creation is growing faster than absorption thats why theres a bottle neck, not only that they are adding to the deficit which inturn is causing a massive credit acceleration and at the same time the loss of the dollar power v the yuan, the dollar will drop to the equllibrium price.

Seems to me its all out of control, china and US banks are messing up the dollar, people and government.

I can explain how china and banks are creating the credit creation, which is leading to a bigger deficit both are responsible for the deficit in an indirect way. ( ill explain it later).

My interpretation of it "The worse thing its pretty sad whats happening we are witenessing the death of the $. "

Edited by crash2006
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BTW, we can begin to see why the Worldbank website shows the UK as the most heavily indebted nation on the planet with regard to outstanding bank debt (the US is a distant second--very distant):

You keep bringing this up and keep misinterpreting it.

1. It shows external debt, not all bank debt (all the figures refer only to external debt).

2. Bank debt is not the same as a nation's debts.

It is, to some extent, a measure of the City being a financial centre for foreign transactions. Also it is not clear if all debts from an institution based in the UK are being counted as in the UK in these statistics or not. Thus if you have a large, global company the debt in the Worldbank figures may include debt held by foreign people in foreign branches of a UK bank. The City may be vulnerable, but you seem almost triumphant about it.

What the chart does show is US government external debt is about twice (per capita) that of the UK (about 10 times total) and US external debt in other sectors about twice that of the UK (or about 1/3 per capita that of the UK).

Edited by Wlad
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