I'm glad someone has finally said it isn't as good as you think. Perhaps around the bars in Westminster things are looking better as the Summer Season gets going, but here in the real world things are anything BUT rosey. I can't get the graphs to come across, but if you have a look at the article, they are all there to be seen.
In essence, things are just as bad, if not worse, than in 1929. The only difference is the interest rate regime and the monetary response ( although one of the graphs worryingly points out that monetary growth continued for some considerable time after 1929)
More importantly, what's happening on the ground?
We landlords are always the first to feel the pinch and last to come out of recession. If you are a manufacturer, you give what little money you have to your suppliers - landlords come last. A landlord will always do a deal to keep you in the property as otherwise he has to pay the rates and the upkeep, so even NO rent is better than NO tenant.
A stark example is one of our tenants who until November was talking of taking extra space. Admittedly his business relies on entertainment, both corporate and private, but his business has literally died. He's fired everyone apart from one YT, and is back where he started 5 years ago -but in worse shape as the bank won't even give him the overdraft it gave him then.
Another is finding that every time he makes a sale, when he delivers, the client wants "£150 off" or some such figure, and his margins are already squeezed to nothing to get the sale. And then arbitrarily an extra 30 days credit is being taken, not least by government departments.
So it ain't over yet by any means.
I stick to my forecast of some time ago that things will continue to get worse until some time around Easter 2010 - and we'll then have 18 months or so of levelling off, before ANY talk of green shoots is appropriate.
Showing posts with label property. Show all posts
Showing posts with label property. Show all posts
Wednesday, June 17, 2009
Friday, May 15, 2009
There are people in Britain starving....
When I was little, my old Nanny used to make me eat my plate clean with the words :
" Eat up your highness, people in Europe are starving."
As this was post war, I'm pretty sure the Brits were doing much worse than the French and Italians, and even the Germans were starting to get there. British Nannies, especially of that era, were quite sure that Europe was never as acceptable as Britain.
I spent part of the morning with an old and dear friend of mine who has retired from the property game.
He still gets stuff offered to him, so it was not a huge surprise when he told me he had bought a "wee shop in Edinburgh" let as a sandwich bar.
Being the cagey Scot he is, he didn't give me much more information - except to say that he had lopped 35% off the asking price and it had immediately been accepted.
There can only be one reason for this - whoever the vendor is, his Bank have told him to get some cash in - any cash at any price. I'd be almost willing to bet it's HBOS. The yield on the deal is more than 10% and makes no sense as even in these times the vendor won't be paying more than 4% maximum.
The word in the market is that there is a gigantic overhang of property on HBOS' books - perhaps as much as £20 billion still, but they can't actively sell it. It would completely destroy the market. They don't want to pay liquidators when they can effectively get it done for free by the existing management.
So for a start all the busted flushes out there are being left to get on with it, but all cash coming in goes straight into the hole, with nothing coming back out. I know at least 3 people who are personally at their wit's end as they have had nothing - nada - into their own hands since October last year. Another friend of mine is busily paying his daughter's children's school fees, and the weekly shopping. God knows what the mortgage company, the car leasing company, the council tax people etc etc are doing for cash from she and her husband - whistling I suspect.
Secondly, through third parties, emails and letters are being sent to potential buyers, so it doesn't look as if it's coming from the Banks. I'm getting on average 20/30 per day. Not particularly attractive, but then I would only need one....
So vent your anger on MPs by all means ( it's all Brown's fault after all), but spare a thought for those ex-property magnates. Even the biggest companies are dying - SEGRO ( ex-Slough Estates) is down from over £6 to below 10p. ie a drop of some 99%.
That's what leverage does to you.
Eat up, for people in Britain are starving....
" Eat up your highness, people in Europe are starving."
As this was post war, I'm pretty sure the Brits were doing much worse than the French and Italians, and even the Germans were starting to get there. British Nannies, especially of that era, were quite sure that Europe was never as acceptable as Britain.
I spent part of the morning with an old and dear friend of mine who has retired from the property game.
He still gets stuff offered to him, so it was not a huge surprise when he told me he had bought a "wee shop in Edinburgh" let as a sandwich bar.
Being the cagey Scot he is, he didn't give me much more information - except to say that he had lopped 35% off the asking price and it had immediately been accepted.
There can only be one reason for this - whoever the vendor is, his Bank have told him to get some cash in - any cash at any price. I'd be almost willing to bet it's HBOS. The yield on the deal is more than 10% and makes no sense as even in these times the vendor won't be paying more than 4% maximum.
The word in the market is that there is a gigantic overhang of property on HBOS' books - perhaps as much as £20 billion still, but they can't actively sell it. It would completely destroy the market. They don't want to pay liquidators when they can effectively get it done for free by the existing management.
So for a start all the busted flushes out there are being left to get on with it, but all cash coming in goes straight into the hole, with nothing coming back out. I know at least 3 people who are personally at their wit's end as they have had nothing - nada - into their own hands since October last year. Another friend of mine is busily paying his daughter's children's school fees, and the weekly shopping. God knows what the mortgage company, the car leasing company, the council tax people etc etc are doing for cash from she and her husband - whistling I suspect.
Secondly, through third parties, emails and letters are being sent to potential buyers, so it doesn't look as if it's coming from the Banks. I'm getting on average 20/30 per day. Not particularly attractive, but then I would only need one....
So vent your anger on MPs by all means ( it's all Brown's fault after all), but spare a thought for those ex-property magnates. Even the biggest companies are dying - SEGRO ( ex-Slough Estates) is down from over £6 to below 10p. ie a drop of some 99%.
That's what leverage does to you.
Eat up, for people in Britain are starving....
Thursday, March 05, 2009
Mad or what?
There has been a property forum happening in Edinburgh which, amongst other things, has opined that commercial property has declined in value by 40% in the past year . Then they say it represents a minus 12% return. Actually, compared to the markets that's quite good, but these two figures are incompatible.
Prime property was yielding about 5%. If it has delivered minus 12% then it has fallen 17%, not 40%.
I suspect, however, that the pundits are referring to the yield having fallen 40%. In the perverse and arcane way that property is valued this means e.g. a 5% yield is now a 7% yield - which actually looks quite tempting.
As my ex-banker advisor says anything yielding above 6% is a steal at the moment. The risk, of course, is of tenants going bust. In that regard, we've had one that is going to leave us. Not exactly gone bust, but as good as. He had a small overdraft of £10,000, pretty much unsecured on his business. It came up for renewal at the end of January, and he somewhat cavalierly rang to say he assumed he could rely on the bank's support for another year.
Not a bit of it. Despite banking with them for over 30 years, and therefore they had all his business transactions for that period, they asked him for a business plan and cash flow. He expressed incredulity, especially as he only ever used a small part of the overdraft and had never over-overdrawn.
Not only did they require the aforementioned, they also needed security, and a £1000 fee, and 7% over base.
Now the latter is hardly relevant, but the fee, as I've said before, means they would be earning a very tasty 18% on their money, if he drew it all down. As he might only draw say £2000, it means the bank would be earning 58% - or much more if he was only overdrawn say half the time. That would be 108%.
The banks "investment/own account" earnings are all gone and are seriously minus. They are going to make that up from people like our tenant.
To cut a long story short, he decided to give up, and I don't blame him.
But I digress.
According to the pundits, in the last wee while RBS and HBOS have accounted for 75% of all property funding in Scotland - and 50% across the whole of the UK.
With that gone, is it any wonder the market's knackered?
PS
A sign of the times. Nationwide will impose charges on overseas card transactions from next month. As Brian Boru has rightly pointed out, not in Europe.
Prime property was yielding about 5%. If it has delivered minus 12% then it has fallen 17%, not 40%.
I suspect, however, that the pundits are referring to the yield having fallen 40%. In the perverse and arcane way that property is valued this means e.g. a 5% yield is now a 7% yield - which actually looks quite tempting.
As my ex-banker advisor says anything yielding above 6% is a steal at the moment. The risk, of course, is of tenants going bust. In that regard, we've had one that is going to leave us. Not exactly gone bust, but as good as. He had a small overdraft of £10,000, pretty much unsecured on his business. It came up for renewal at the end of January, and he somewhat cavalierly rang to say he assumed he could rely on the bank's support for another year.
Not a bit of it. Despite banking with them for over 30 years, and therefore they had all his business transactions for that period, they asked him for a business plan and cash flow. He expressed incredulity, especially as he only ever used a small part of the overdraft and had never over-overdrawn.
Not only did they require the aforementioned, they also needed security, and a £1000 fee, and 7% over base.
Now the latter is hardly relevant, but the fee, as I've said before, means they would be earning a very tasty 18% on their money, if he drew it all down. As he might only draw say £2000, it means the bank would be earning 58% - or much more if he was only overdrawn say half the time. That would be 108%.
The banks "investment/own account" earnings are all gone and are seriously minus. They are going to make that up from people like our tenant.
To cut a long story short, he decided to give up, and I don't blame him.
But I digress.
According to the pundits, in the last wee while RBS and HBOS have accounted for 75% of all property funding in Scotland - and 50% across the whole of the UK.
With that gone, is it any wonder the market's knackered?
PS
A sign of the times. Nationwide will impose charges on overseas card transactions from next month. As Brian Boru has rightly pointed out, not in Europe.
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