Friday, Dec 18, 2009

The banks are facing a much bigger property problem than housing

Guardian: Commercial property values may plummet, Bank warns

"The Bank of England has warned of a vicious circle of panic-selling of commercial property by banks, potentially triggering a ruinous double dip in values. There is also a risk that worsening economic conditions will lead to widespread loan defaults by UK real-estate companies. Commercial property prices have already fallen 50% from the market's peak in July 2007." WIll the banks react by speeding up residential repossessions while prices are still high or will they carry on with 'extend and pretend?'

Posted by tpbeta @ 09:29 AM (1724 views)
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1. mark wadsworth said...

Yup, it's good to remind ourselves of the figures.

UK bank lending secured on commercial property was fairly static at around £50 billion for ten years 1990 to 2000, but then went up to £250 billion in the next eight years 2000 to 2008. Values rocketed and are now plummeting nicely (or "Rental yields are improving" as the VI's like to express it). In relative terms, the bubble was even more insane that household borrowing for mortgages (the volume of household borrowing 'only' doubled from £700 billion to £1,400 billion between 1997 and 2007).

Friday, December 18, 2009 10:21AM Report Comment

2. jack c said...

Q) What investment sector attracted the most money in October 2009 according to the IMA (Investment Management Association) ?

Friday, December 18, 2009 11:03AM Report Comment

3. mark wadsworth said...

@ JackC, now let me guess ... either tin futures or UK commercial property? But probably tin futures.

Friday, December 18, 2009 11:52AM Report Comment

4. jack c said...

Mark - according to the IMA it was Commercial property

Investors have renewed their appetite for commercial property having endured dreadful returns for the best part of three years. According to the Investment Management Association, the property sector was the highest selling sector in October, accounting for £367.6 million of net retail sales – the highest since May 2007. Property funds have seen positive net retail sales for seven consecutive months. It is in stark contrast to last November and December when property was the lowest selling sector. SOURCE Telegraph 1/12/2009

I noticed several months back that commercial property was being vigourously promoted in the various financial weeklys and hey presto it tops the IMA listings in October. There is actual a close correlation between UK Commercial and UK residential property but I cant at this juncture find the chart.

Friday, December 18, 2009 12:27PM Report Comment

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