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Commercial property meltdown - and 50% off ALL property values from peak predicted
carolt
Posts: 8,531 Forumite
http://www.guardian.co.uk/money/2008/dec/27/commercial-property-values-city-london
Next to go? Commercial property in crisis as City faces a chill winter
Glut of premises and falling demand leave landlords facing 50% fall in values
Commercial property values will halve and rents and occupancy rates will suffer steep falls as the once-buoyant sector faces meltdown in 2009, according to property experts.
Severe overcapacity in London after a rash of speculative office building and a collapse in demand is seen as the main reason for the expected crash.
...
The derivatives market for property swaps provides a good indicator of where capital values in the sector are heading, according to Matthew Oakeshott, who advises pension fund consultant OLIM. Oakeshott, a Liberal Democrat Treasury spokesman in the House of Lords, said the swaps market, usually based on the IPD All Property index, is increasingly used by property fund managers looking to fix their returns. According to figures for November, the market is pricing in a decline of 51% in values from peak to trough, signalling a further 32% decline in capital values.
Picky buyers
"Fifty per cent off capital values is a realistic estimate for commercial and residential property prices from last year's peak," Oakeshott said. "Income yields for shops, warehouses and offices let to strong tenants on long leases are attractive now at about 8%, more than double long gilt yields. But the banks have bucketfuls of property they must sell, so we few cash buyers are being very picky.
Next to go? Commercial property in crisis as City faces a chill winter
Glut of premises and falling demand leave landlords facing 50% fall in values
Commercial property values will halve and rents and occupancy rates will suffer steep falls as the once-buoyant sector faces meltdown in 2009, according to property experts.
Severe overcapacity in London after a rash of speculative office building and a collapse in demand is seen as the main reason for the expected crash.
...
The derivatives market for property swaps provides a good indicator of where capital values in the sector are heading, according to Matthew Oakeshott, who advises pension fund consultant OLIM. Oakeshott, a Liberal Democrat Treasury spokesman in the House of Lords, said the swaps market, usually based on the IPD All Property index, is increasingly used by property fund managers looking to fix their returns. According to figures for November, the market is pricing in a decline of 51% in values from peak to trough, signalling a further 32% decline in capital values.
Picky buyers
"Fifty per cent off capital values is a realistic estimate for commercial and residential property prices from last year's peak," Oakeshott said. "Income yields for shops, warehouses and offices let to strong tenants on long leases are attractive now at about 8%, more than double long gilt yields. But the banks have bucketfuls of property they must sell, so we few cash buyers are being very picky.
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Comments
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The fact that landlords now have to pay business rates on empty commercial property (after a small period to give them a chance to re-let) isn't "helping" (from the Landlord's point of view)!0
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About time too. It may give some businesses a chance. We came out of our shop nearly 3 years ago when the rent doubled.0
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The fact that landlords now have to pay business rates on empty commercial property (after a small period to give them a chance to re-let) isn't "helping" (from the Landlord's point of view)!
It is a problem with property investing when times are hard is that when you buy a property you take on a liability along with the asset - taxes and keeping the place up. At least if you buy shares then the most you can lose is 100% of your investment in most cases*!
Service charges can easily run in to the thousands.
* There is a company listed on the Aussie stock market where a share comes with the obligation to buy another in a year's time at $1 each. The original shares have tanked in value and as a result you can buy a significant chunk of the company for a few $10,000s. The trouble is that then comes with an obligation to by shares worth $000,000s! A couple of 'housewife investors' were caught out.0 -
Hello Generali.
You up at this time? Is it not the middle of the night in Oz?0 -
Hello Generali.
You up at this time? Is it not the middle of the night in Oz?
Hey carolt.
Yeah, it's 2am but it's pretty warm tonight and I'm having trouble sleeping as a result (25C). I opened a nice bottle of white wine and have settled down for a post. Mrs Generali got badly sunburned yesterday so is hot and restless which doesn't help.
All well in the UK? Pretty chilly there right now I guess.0 -
Makes you sick, doesn't it?I used to think that good grammar is important, but now I know that good wine is importanter.0
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iolanthe07 wrote: »Makes you sick, doesn't it?
Sunburn or collapsing property prices?0 -
Was actually quite mild (for UK in Dec) 7-8C up until last night, feels quite a bit colder today. Perhaps the weather is beginning to mirror the economic climateAll well in the UK? Pretty chilly there right now I guess.
In whih case we're in for a damn cold New Year Hope for the best.....Plan for the worst!
"Never in the history of the world has there been a situation so bad that the government can't make it worse." Unknown0 -
It's effing freezing down here. Went out brief sales shopping earlier, but far too cold.....
Mmm, 25 degrees, that sounds lovely....0 -
.................................
Removing personal stuff0
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