Property Crunch Could Whack Brit Banks

The US subprime crisis is putting the brakes on Britain's commercial property boom, driving down real estate values and putting banks in jeopardy.

Market fundamentals have indeed changed quite dramatically for commercial property. One indicator is the so-called "average prime yield," which has risen during the past year -- a sign of cooling demand and weakening returns on property investments. Data from realtor CB Richard Ellis show the underlying price of real estate assets in Britain has declined relative to rents, causing the yield to rise. It climbed 50 basis points, to 5.7 percent, in the fourth quarter of 2007 -- some 90 points higher than during the same period in 2006.

U.K. Housing Market Won't Pick Up This Year

Such gains have now come to an end. U.K. home prices fell for a third month in January, according to Rightmove Plc, Britain's most-used property Web site. The average asking price for U.K. homes dropped 0.8 percent to 230,428 pounds in January from the previous month, Rightmove said last week. In December, there was a 3.2 percent decline.

Mortgage approvals dropped to the lowest in at least a decade in December as banks curbed their lending and higher interest rates deterred buyers.

Land Securities Sells Assets at Profit as Prices Fall

The sales in the three months ended Dec. 31 reaped 5.6 percent more than the commercial properties' estimated value at the start of the quarter, the London-based company said in a statement today. Land Securities, the world's fourth-largest real estate investment trust, has already leased 93 percent of the 241,700 square meters (2.6 million square feet) of development space due for completion in fiscal 2008.

Standard Life says UK property fund liquidity ok

LONDON, Jan 18 (Reuters) - UK insurer Standard Life (SL.L: Quote, Profile, Research) said on Friday it had not prevented retail investors from withdrawing cash from its flagship UK property fund, as liquidity in the fund remains sufficient.

"The situation is the same as in December. There's sufficient liquidity and there are no queues in place," to exit the firm's pooled pension property fund, said a Standard Life spokesman.

U.K. Property Stocks May Surge

U.K. real estate stocks rose in London trading after a Morgan Stanley analyst said the group may gain at least 20 percent in the first half as the Bank of England cuts interest rates to avert a recession.

British Land Co., Europe's biggest real estate company by assets, Segro Plc, the U.K.'s largest owner of office parks, and Brixton Plc, the country's leading industrial landlord, all climbed more than 5 percent after Morgan Stanley raised its rating on the stocks.

Jaguar Capital buys key London property

Irish private wealth manager Jaguar Capital has bought the London headquarters of one of the largest firms of UK lawyers, SJ Berwin.

While the sale price of the building was not revealed, the original guide price of the property - overlooking the Thames at Southwark Bridge - was £180m sterling.

The property comprises some 231,000 square feet of office space over basement, ground and four upper floors.

British housing market facing tough years ahead

British house prices will stagnate this year and next and there is a two in three chance that prices fall on an annual basis at some point in 2008, a Reuters poll of property market analysts showed.
The survey calls a definitive end to a decade-long housing boom, fuelled on cheap credit, that paused briefly three years ago but is now reeling from a slowing economy, debt loads, and the grip of a global credit crunch.
Nearly all of the analysts polled said UK housing was too expensive compared with fundamentals, but only by a median 15 percent, the same as three months ago. Some rated British homes as very overvalued, with estimates as high as 40 percent.
But in a group -- as they have been many times over the boom that has tripled average house prices over the past 10 years or so -- economists were not willing to forecast a property price fall to bring affordability back in line.

U.K. Real Estate Losses May Be Biggest in 25 Years

The U.K. market is falling apart,'' said Peter Hobbs, London-based head of research at RREEF Real Estate, a Deutsche Bank AG unit that manages about $100 billion. ``There's a risk that this cyclical downturn turns into something worse.''

Britain's 700 billion-pound commercial property market will perform worse in 2008 than the rest of Europe, the U.S. and Asia, Hobbs said. The slide is accelerating as banks tighten lending standards across the globe after losses of more than $90 billion from U.S. mortgage investments.

Gulf investors weigh up the benefits of UK downturn

Private and leveraged investors, banks and funds, including Gulf-based sovereign wealth funds, dominate Middle East investment in the UK property sector. Islamic financial institutions have also been active in the UK commercial real estate market through transactions or real estate investment funds such as those launched by Noriba Bank; Kuwait Finance House; Gulf Finance House; Qatar Islamic Bank; Arcapita Bank; ABC International Bank and others.