Saturday, May 16, 2009

Banks choosing not to opt for firesales in commercail property

Property’s £225bn time bomb

‘It is very interesting that a lot of the loans have been extended into the next three years,’ says Maxted. ‘We can see that institutions have so far decided not to close on loans. ‘Banks have been reluctant to flood the market with properties when the market is in such a depressed state, so instead they are working with their borrowers.’ Dominic Reilly, partner in charge of property finance at King Sturge, a sponsor of the research, added: ‘It has so far been very different from the early 1990s as there have been very few property portfolios pushed on to the market. If banks have lent on good assets and they are being paid the interest, then they are quite happy to get with it.’

Posted by turkey @ 05:13 PM (839 views)
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3 thoughts on “Banks choosing not to opt for firesales in commercail property

  • This is happening in residential property as well as commercial. A friend of mine is an accountant with a number of buy-to-let clients. Some have a few hundred properties and are in major difficulty. The banks have not repossessed the properties yet because they would take a big hit. They are letting the firms continue trading, hoping that they will trade through it. Its storing up a whole lot of trouble for the future because as we all know, prices will fall a lot more from here and economic recovery will take many years.

    Just let the bubble burst and lets get on with it!

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  • No comments yet? This is a good article. Some quotes.

    “It has so far been very different from the early 1990s as there have been very few property portfolios pushed on to the market. If banks have lent on good assets and they are being paid the interest, then they are quite happy to get with it.’

    Around nine in 10 organisations reported that they now held loans in breach of financial covenants – a statistic that doubled from the previous year when just 45% said they had loans in default.”

    “More than two-thirds of outstanding debt is due for repayment between now and 2013, higher than that recorded by previous surveys. This is partly because loans due to mature in 2008 have been extended as borrowers have been unable to refinance. At the end of 2007, the proportion of debt due to mature within the following five years was 60%.”

    “We do not test LTVs if income and interest is being paid. Why? Well, if new valuation shows a lower value, we have to set aside capital to cover any potential losses. This capital cannot be lent out or used elsewhere in the bank – it becomes idle”

    “Major investors are still not buying, so why should we be lending? If major funds and REITs are not buying, we should not be lending”

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  • I am sorry but the banks are manipulating the market against buyers intrest when they have been bailed out by potential buyers.

    This is not free market anymore. Banks, sellers and estate angents are in the businees of maniputating the market.

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