File On 4 on the banks exposure to commercial property

zappahey

While Britain's top bankers celebrate their bonuses, Michael Robinson investigates the commercial property market and the nasty surprises that it may hold for the banks and for the long-suffering British taxpayers who bailed them out.

I only caught snippets of this as I drove in and out of long wave reception areas, but it seemed to be pretty interesting.

http://www.bbc.co.uk/programmes/b00qhrxd

Pobby

Just an aside. A local pub has come up for sale, on of many in my area. A lot of bricks, massive basement, good sizes bar. 3 stories and the said basement. No one can make a living there. I would suppose the owning pub company would like to see £500 a week rental. Anyway, it recently came up at £225-£250,000. No takers.

Then £165,000. No takers. Auction price is estimated at £110,000. I was tempted as it`s a huge site. Yet no parking, so no planning permission for flats. As a pub, can`t seeing it doing more than £1,5000 of sales a week. A white elephant imho.

Kohoutek

Pobby wrote: »

Just an aside. A local pub has come up for sale, on of many in my area. A lot of bricks, massive basement, good sizes bar. 3 stories and the said basement. No one can make a living there. I would suppose the owning pub company would like to see £500 a week rental. Anyway, it recently came up at £225-£250,000. No takers.

Then £165,000. No takers. Auction price is estimated at £110,000. I was tempted as it`s a huge site. Yet no parking, so no planning permission for flats. As a pub, can`t seeing it doing more than £1,5000 of sales a week. A white elephant imho.

Interesting anecdote. Judging by the Radio 4 programme, it sounds like a 50% reduction in value applies to big commercial property portfolios too. Sounds like there is another huge debt timebomb on the horizon, an economist on the programme said 'the banks are going to need more capital [from the government]'.

PasturesNew

There's a bike shop local to me that went on at £25k in 2009, now listed at £5k.

Pobby

Following on from my post regarding the pub. Many of the pub companies are very indebted. Friend of mine sold the freehold on his. It wasn`t that long after that the pub co tried to offload it at £100k less than they had paid for it. Pub co`s, very much into the property can only go up brigade methinks.

Sad really as the old style pub was very much a British thing. The smoking ban and cheapo super market beer has helped their demise.

blueboy43

Pobby wrote: »

Just an aside. A local pub has come up for sale, on of many in my area. A lot of bricks, massive basement, good sizes bar. 3 stories and the said basement. No one can make a living there. I would suppose the owning pub company would like to see £500 a week rental. Anyway, it recently came up at £225-£250,000. No takers.

Then £165,000. No takers. Auction price is estimated at £110,000. I was tempted as it`s a huge site. Yet no parking, so no planning permission for flats. As a pub, can`t seeing it doing more than £1,5000 of sales a week. A white elephant imho.

Do you mean £1500 (in which case, I'm not surprised that it can't operate as a pub) or £15000 in which case it would be a cracking investment.

amcluesent

>it sounds like a 50% reduction in value<

Peeps are waking up to Britain slumping into long-term decline and austerity, as the few who are in work see their income fall in real terms, along with pensioners living off scraps. On a 20-year NPV view, there's no reason why commercial property in the North East is worth any more than in, say, Romania or Peru. Likely it'll be worth a lot less than retail space in Mumbai or dozens of Chinese cities.

Pobby

£1,500. At £15,000 I would be right in there!!!! My local, also a traditional terrace is not doing £2,000 a week. The rent is £500 and the land lady has a day time job.

Kohoutek

amcluesent wrote: »

>it sounds like a 50% reduction in value<

Peeps are waking up to Britain slumping into long-term decline and austerity, as the few who are in work see their income fall in real terms, along with pensioners living off scraps. On a 20-year NPV view, there's no reason why commercial property in the North East is worth any more than in, say, Romania or Peru.

Exactly. With the enormous public cuts looming in the next 8 years (according to the government current's timetable to balance the budget by 2018), property values will plummet in the North East, Northern Ireland, Wales, where the public sector currently provides a very large proportion of all employment. Local authorities in particular are going to contract massively.

A 50% fall in residential property as well as commercial property doesn't look that unrealistic over that timeframe too in those areas.

chucky

Kohoutek wrote: »

A 50% fall in residential property as well as commercial property doesn't look that unrealistic over that timeframe too in those areas.

nice one - you could have been taken seriously 18 months ago, i suggest you go back to the comedy circuit as a stand up :beer:

Kohoutek

chucky wrote: »

nice one - you could have been taken seriously 18 months ago, i suggest you go back to the comedy circuit as a stand up :beer:

Did you read the rest of my post? Why do think a 50% drop in Northern Irish residential property over the next eight years is impossible, in a region where 30% of the workforce is in the public sector (in view of upcoming massive cuts). House prices have risen in NI by 100% in the last decade (http://www.propertynews.com/blog/891/Northern-Ireland-house-prices-rose-99-during-Noughties-). Do you know what a bubble is?

Take a look at the 'The next phase of the house price crash' thread too.