Sunday, December 28, 2008

One for our occasional series on property prices

UK banks face £70bn property bombshell

A fall in commercial property prices could (ie will) lead to more loan writedowns for the banks

Posted by jonb @ 11:47 PM (761 views)
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3 thoughts on “One for our occasional series on property prices

  • I remember the last crash. It was the commercial sector which crashed BEFORE the real falls in residential. From all of a sudden having no problem to arrange pre-let build projects, noone was interested in anything unless it was dirt cheap. Banks moved in to repossess the sites as funding ran out. Noone wants sites –> no building anyway –> no jobs (for tenants in the buildings) –> banks in trouble. But it wasn’t just banks in trouble, pension funds lent a lot in the commercial property sector. I wonder whats around the corner here??

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  • The business model used within Comm Prop over the past few years does not assume even a minor reduction in rents via tenant going under- and not being replaced.

    The model assumed like every other model that drove the boom that things would keep expanding. History shows this is what always happens. We theorise on this site that govts should pursue longer terms policies that foster greater stablitity but govts prime goal is staying in power and delayed gratification is not a goal we seem to be able to pursue en masse.

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  • The commercial property investment arm of a certain bank that my company had dealings with was proposing a joint venture in late 2007 until quite recently which would have led to them buying large amounts of commercial property. The reasons for not following through had nothing to do with their opinion of the commercial property market. I thought they were nuts. I still think they are nuts. Commercial property still has a long way to go in the downwards direction. These banks are either corrupt, or filled with idiots…or both. In September/October we had dealings with some hedge fundies who were thinking of investing with us. They were completely shocked/surprised by what happened in October and retracted their offer as they had to go and lick their wounds from the beating they took in the markets. Breathtaking that these guys can be in control of billions of pounds. Complete and utter idiots.

    I’ve doubled my money this year. I moved my pension into cash last year. The rest of my colleagues have had their pensions slaughtered on the advice of a “financial advisor” (with a mullet!) who derided me as a financial Luddite. All the financial “whizz-kids” I have had dealings with over the past couple of years have lost 20-30%. I will never, ever let the financial services industry invest any of my money if I can help it. There are too many rubbish professional investors. Even some of the successful ones, such as John Duffield, have shown themselves to be one trick ponies in my opinion.

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