Watch out, the great £50bn property unload is about to begin

carolt

http://www.telegraph.co.uk/finance/comment/jeremy-warner/7903205/Watch-out-the-great-50bn-property-unload-is-about-to-begin.html

chucky

Banks are ready to purge unwanted commercial property

So don't bank on a rapid recovery in commercial property prices any time soon.

anyone buying commercial property?
it's a lovely headline but nothing really to see here...

Blacklight

Banks are ready to purge unwanted commercial property from their balance sheets.

Well it's good news for anyone looking to buy somewhere to develop in to flats I suppose.

FTBFun

Uh oh - part of my pension pot is in commercial property.

At least I'm only 28 so there's enough time for it to recover.

Luckily this forum is "Debate House Prices and the economy", right?

carolt

chucky wrote: »

anyone buying commercial property?
it's a lovely headline but nothing really to see here...

So commercial property crash will have no impact on anything else in the economy then?

I don't think so.

chucky

carolt wrote: »

So commercial property crash will have no impact on anything else in the economy then?

I don't think so.

sorry to have to correct you but the crash has happened

Yet despite the fastest and deepest commercial property slump since records began – a peak to trough fall of approximately 44pc

the article is looking at the write-offs for these properties with the banks

Banks have been waiving covenant breaches and extending facilities to avoid forced sales

if they decide to call in these loans and write them off it's an issue but currently they're receiving rents on those properties and the loans are being serviced - so not it's not an issue

Rentals are generally still being paid and property loans are therefore being serviced. The upshot is that banks don't have to count many of these loans as non-performing, even though they may be in breach of loan to value covenants.

if you think that the banks will be calling in these loans or forcing sales then there will be an impact but for now it's just another 'maybe' story...

carolt

chucky wrote: »

if you think that the banks will be calling in these loans or forcing sales then there will be an impact but for now it's just another 'maybe' story...

Yes, that's exactly what the article suggests will happen.

chucky

this particular story on commercial property is nearly a year old, from July 27, 2009... see below

Banks could be heading for a second wave of big losses as financial institutions begin to tackle the crippling legacy of £300 billion in lending to the UK commercial property sector.

British banks are expected to follow their American counterparts, which are already having to bite the bullet on commercial real estate losses.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6728251.ece

if it happens, it happens

carolt

No, it's not - this article is from 22 July 2010 - today.

Here's a quote:

"
But here's why this time it may be different from previous cycles. Most commercial property investment is based on leverage. A little bit of equity is provided, but the bulk of the finance comes from the banks. If the value of the property rises, the equity holder is quids in. That game may be over.

As Adair Turner, chairman of the Financial Services Authority, made abundantly clear in a speech last week, regulators are determined to put a stop to the boom and bust of credit markets, and since commercial property tends to be a key part of this cycle, by implication he's going to attempt to prevent "excessive" property speculation.

The causes of the financial crisis were many and varied, but the underlying factor was simple enough – too much credit, too easily available at too low a price. This in turn drove unsustainable asset price bubbles.

Turner and other international regulators are therefore putting in place new policy tools which will reduce leverage in the financial system and constrain it in the real economy.

That's a very different world from the one we have been used to, and will plainly transform the dynamics of the commercial property market.

So don't bank on a rapid recovery in commercial property prices any time soon. It may be many years before we are away to the races again, and if Turner gets his way, it will be never."

Rinoa

carolt wrote: »

No, it's not - this article is from 22 July 2010 - today.

Chucky didn't say your article was from 12 months ago, he provided a link to an almost identical article from 12 months ago revealing the exact same story.

So this is old news about commercial property with zero relevance to the price of residential house prices.

Graham_Devon

Telegraph thinks its an issue. FSA thinks it's an issue.

Chucky is trying to tell us it's simply not an issue.

Make your own decisions as to who to believe.