Nomura Gets 6 Years Free Rent For London HQ - Canadian Pensioners Probably Not Happy......

The landlord is Oxford Properties ( the property arm of the Ontario pension fund in combination with UBS )....The 365,000 active and retired members of one of the biggest Canadian pension funds are probably not happy....... The unfavourable CAD/GBP Chart isn´t making things better..... And with stories like this it is only going to get worse...... For more "good" news on the pension front i recommend the blog Pension Pulse.....Unfortunately the situation in Germany isn´t any better.....I have listened to the latest conference call from Thyssen Krupp ( one of the largest steel producers and close to a junk rating ) & the CFO ( former CFO from überlevereged CONTI..... ) said the ( analogous ) following ( and he was not kidding! )..... "Good that our pension plan is still underfunded by over € 6 billions..... If we would have funded it in the past few years the deficit would be much bigger".... Probably the best spin attempt i´ve heard so far... CHUZPAH!

Der Vermieter ist in Kombination mit der UBS der Immobilienarm des Pensionsfonds von Ontario.....Keine guten Nachrichten für 365,000 Mitglieder einer der größten kanadischen Pensionskasse...... Wenn man jetzt auch noch die nicht gerade vorteilhafte Währungsentwicklung hinzunimmnt ( siehe CAD/GBP Chart ) dürfte der Ärger nicht geringer werden..... Und dank Nachrichten wie diesen ist eine Besserung nicht in Sicht...... Wer mehr "gute" Nachrichten zum Thema Pensionskassen hören möchte dem empfehle ich Pension Pulse oder die letzte Telefonkonferenz von Thyssen Krupp ( demnächst höchstwahrscheinlich mit einem Junkrating )..... Sinngemäßes Zitat CFO ( kommt von Conti.....) " Gut das wir zur Zeit mit über 6 Mrd unterfinanziert sind ...." Nach dem Motto je größer das Defizit desto weniger können wir mit unseren Einlagen verlieren..... So verkauft man grotesk schlechte Nachrichten noch als Erfolg.....PS: Überflüssig zu erwähnen das solch geringe Summen in der Präsentation die fleißig den Aufbau der flüssigen Mittel abfeiert vollkommen fehlt....CHUZPE!

Let´s at least hope they have viewed this deal from the start as "opportunistic"........

Bleibt zu hoffen das der Deal von Anfang an als "Opportunistisch" angesehen worden ist........

> From the 2007 press release when the deal was anounced......

> Aus der Pressemitteilung vom Sommer 2007

"The Watermark Place development is another important step in the expansion of Oxford's global investment platform,demonstrating the skills, capabilities, and reach of Oxford and its investment professionals. We are excited about our relationship with UBS - a world-class investment manager and a great like-minded partner." Andrew Trickett, Vice President of Corporate Development & Investment, added "this development represents a unique investment opportunity for Oxford and an outstanding addition to London's office market.

LONDON, Aug 31 (Reuters) -

Japanese investment bank Nomura has secured a rental deal on its new London headquarters allowing free rent for almost six years, the Financial Times reported, citing the terms of a deal to be announced on Tuesday.

The FT said the bank will confirm plans to move its UK business, including the staff taken on as part of the Lehman Brothers acquisition, into a new office development on the Thames.

Up to 4,000 banking staff will move into the 12-storey Watermark Place next year, many relocating from the former Lehman Brothers building in Canary Wharf.

The landlord, Oxford Properties, is the property arm of an Ontario pension fund and UBS

UPDATE via German FT Mietfrei im Londoner Hybrisbau

The term of the leasing contract is 20 years and the price is 40 british pound per square meter ( peak boomtimes 70 british pounds )

Der über 20 Jahre laufende Mietvertrag sieht nämlich vor, dass die Japaner in den ersten sechs Jahren kostenlos (!) in dem Glaspalast an der Themse residieren dürfen. Für die verbleibende Zeit verlangen die Eigentümer - ein Konsortium aus der Schweizer UBS und einem kanadischen Pensionsfonds - 40 Pfund je Monat und Quadratmeter. Zu Boomzeiten waren 70 Pfund üblich.

> With news like this no wonder Canary Warf needs a bailout......

> Dank solcher Nachrichten ist es wenig verwunderlich das Canary Warf in extremer Schieflage ist......

China invests in Canary Wharf with £880m bail-out of Songbird Telegraph

China is set to become the joint-largest shareholder in the owner of Canary Wharf after joining an £880m bail-out of Songbird Estates with its first major investment in UK property.

UK CRE Now Off 45 Percent From The Peak.......

According to IFD, UK commercial properties values have been declining fast with peak to current declines of around 45%, with major declines noted in all major segments - retail, offices and industrials

At the same time the amount of available floor space for occupation increased at the fastest pace since 1999 in all regions with the exception of London (Chart 2) and thevalues of inducements rose at its fastest pace since the survey’s history in 1999. Collectively this implies that an upward correction in prices in the foreseeable future is unlikely.

> I still would almost die to see a similar stat for Dubai ( see The Upcoming Skyscraper Tsunami..... )

> Ich würde immer noch liebend gerne eine ähnliche Statistik für den Markt in Dubai sehen ( siehe The Upcoming Skyscraper Tsunami..... )

> Only 6 years of free rent.......Cleary a sign that the bottom is near....... ;-)

> Lediglich 6 Jahre Mietfrei in einer Top Lage Londons......Klares Anzeichen das der Boden wie tagtäglich propagiert inzwischen erreicht ist.... ;-)

Update:

Stuy Town, Which Is On Verge Of Default, Costs Florida's Pension Fund Entire $250 Million Investment

For Commercial Real Estate, Hard Times Have Just Begun

Corporate Pension Fund shortfalls weigh on recovery

The Coming Storm / Pimco on UK

After Ben Bernanke and the Fed have saved the US it is time to move to the UK (sarcasm off)....Myles Bradshaw from Pimco has an excellent take on the UK. He is very bullish on UK gilts. The conclusion is that he is not very optimistic on the UK economy. Key to his outlook is that the housing market has some very tough times ahead...... If you want to read about my view on the UK (including housing, commercial real estate, BOE, Northern Rock, pound etc ) click here . If Pimco is bullish on bonds i would be the super bull....... ;-)

Nachdem Bernanke und die Fed die Krise in den USA ja gestern anscheinend beendet haben ist es Zeit sich mehr denn je dem nächsten Patienten zuzuwenden.....(Sarkasmus) Myles Bradshaw von Pimco hat hier eine gute Übersicht über das momentane Bild in UK zusammengezimmert. Er ist ziemlich bullish was UK Staatsanleihen angeht. Kann nur bedeuten das er für die Wirtschaft eher pessimistisch ist. Dreh und Angelpunkt seiner Analyse ist der britische Immobilienmarkt der weltweit seinesgleichen sucht. Um meine bisherigen Meinungen zu UK (private und gewerbliche Immobilien, Northern Rock, Boe, Pfund etc) klickt bitte hier. Wenn man Pimco als Anleihebullen bezeichnet dürfte ich als der Superbulle durchgehen....... :-)

The Coming Storm / Myles Bradshaw
....Looking forward, monetary policy will tighten for consumers even if the Bank of England’s Monetary Policy Committee (MPC) leaves rates unchanged. Firstly, mortgage rates are set to rise as consumers refinance out of their 2005 2-year fixed-rate deals. Secondly, consumers will be hit by a widening in mortgage spreads as banks pass on the higher funding costs from the recent crisis in wholesale money markets. Unfortunately, this will all occur at a time when income growth is weak and debt-servicing costs are at the highest levels since the last recession.

The party is over

Mortgage Rates on the Rise
According to the Council of Mortgage Lenders (CML) data, fixed-rate mortgage lending doubled to an estimated £230 billion in the four quarters from July 2005 as households took advantage of the August 2005 rate cut to lock in low mortgage costs. At the end of 2006, fixed-rate mortgages accounted for about 45% of the £1 trillion stock of outstanding mortgages, up from 25% in 2003. This locking in of low mortgage rates has lengthened the time it takes for MPC interest-rate increases to affect the consumer. By May 2007, base rates had increased by 100bp but the effective mortgage rate had only risen by 37bp.

The next twelve months will probably see most of these fixed-rate deals mature and interest rates for a majority of households rise. CML data already shows that 2-year, 75% Loan-to-Value (LTV) mortgage rates averaged 4.67% in July 2005 compared to 6.1% in July 2007. The inverted shape of the yield curve means there is little incentive to switch into a floating-rate mortgage now; the average CML base rate tracker rate was 6.27% in July.
But fixed-mortgage rates will probably rise further still, irrespective of whether the MPC raises rates again. Fixed-rate mortgages tend to track wholesale interest rates in the bond market with a lag of two to three months. The mortgage rate presented to the consumer in July has usually been fixed in the bond market by the mortgage lender in April or May. Since April, 2-year sterling swap rates have increased by about 40bp. Households may be able to achieve lower interest rates by paying higher arrangement fees to mortgage lenders or by signing up to discount mortgages that penalize the borrower with lock-ins after the discounts expire. But the bottom line is that come October, 2-year fixed-rate deals could be some 175bp higher than they were two years ago; slightly more than the increase in base rates over that period. Monetary policy is not impotent; it is just taking longer to work.

Changed Conditions for Mortgage Lenders
But this is only half the story. Over the past few years, competition in the mortgage market has driven down the spread between consumer mortgage rates and wholesale interest rates – which indicate mortgage lenders’ funding costs – to unsustainable levels. Chart 2 shows how fixed-rate mortgages tend to track wholesale rates, and how mortgage spreads have narrowed sharply over the past two years. These spreads are now set to widen.
Firstly, the sharp rise in LIBOR rates that occurred in August will increase mortgage lenders’ funding costs. The recent change in credit investors’ risk appetite in the current market turbulence means that banks’ balance sheets have been saddled with large amounts of loans from private equity leveraged buy-outs and lines of contingent credit that have been called. The recent stress in global money market rates – where overnight Sterling rates rose by as much as 70bp to a high of 6.5% – reflects banks’ increased need for cash to finance these unexpected new loans. Overnight rates have now settled down, partly due to large liquidity injections by the U.S. Fed and the European Central Bank (ECB), but one- to six-month money market rates have not. Three-month Sterling LIBOR rates rose over 60bp in August, despite the fact that interest rate expectations fell. While LIBOR rates may fall over the coming weeks, they are unlikely to quickly return to July levels unless central banks cut rates. The net result is that monetary policy has been effectively tightened over August despite the MPC leaving rates unchanged. Secondly, the growth of the residential mortgage-backed securitisation (RMBS) market has enabled many mortgage lenders to sell repackaged mortgages to investors. This has reduced lenders’ exposure to borrowers’ credit risk and encouraged business models that focus on high volumes and low margins. But investors’ appetite for asset-backed securities like RMBS has been dampened by the recent turmoil in credit markets. More importantly, the cost of securitising these assets has increased (see Chart 3). The spreads over LIBOR on U.K. residential mortgage-backed securities have gone back to early 2004 levels, when fixed-rate mortgage spreads were about 0.3% higher. Many mortgage lenders will come under pressure to raise margins and reduce volumes. This does not bode well for the consumer.
Higher Income Share for Debt Servicing
But it is not just the spread on mortgage rates that has fallen over the past few years. Lending standards have also declined due to the easing in credit availability. As a result, homebuyers have been able to borrow more money relative to their income while debt-servicing costs are now taking a larger share of consumers’ income. The CML data show that average Loan-to-Income ratios have increased to 3.16x in June, up from 2.4x in 2000. Higher deposits have kept LTV ratios pretty stable at around 80%, so mortgage lenders should be protected if house prices weaken. But increased debt levels have now driven debt-servicing costs as a share of income markedly higher. According to the CML, mortgage interest payments accounted for 17.7% of the average borrower’s income in June, up from 15.4% twelve months ago. This is the highest level since 1992, in spite of the fact that interest rates are about 40% lower than in 1992. Factor in repayment of principal, and debt-servicing costs are within spitting distance of the 1990 high. Chart 4 shows Citigroup’s estimate of total (rather than just mortgages) household debt service relative to disposable income. ...

Lower Retail Sales Looming
On top of this, leading indicators of the housing market have already started to roll over, despite the modest rises in effective mortgage rates to date. The recent Royal Institute of Chartered Surveyors (RICS) survey showed that surveyors’ price expectations fell sharply to the lowest level since summer 2005. Housing activity has been highly correlated with consumption.....The RICS measure of new home buying enquiries has been a great leading indicator of housing activity. It tends to lead mortgage approvals by about three months, which, in turn, lead retail sales by about five months. The RICS measure has fallen sharply since the middle of last year and is only just above the lows of 2005, which preceded a collapse in retail sales growth and led to a surprise interest rate cut in August 2005.

The effects of the rate hikes will start to show over the coming months. Consumers will see higher interest rates as fixed-rate mortgages roll off and as mortgage spreads widen. Tepid income growth and debt-servicing costs near record highs mean consumers have little to cushion them against higher interest rates. Facing this storm, the U.K. economy is likely to slow down and grow below trend.

Bank of England To Rescue Northern Rock / Stock Tanking / BOE A Paper Tiger ?

No wonder the housing & mortgage market is more and more dominating headlines even in the yellow press...... And you know worse the situation in the UK is when Bekham; Kate Moss etc are not dominating page one in the yellow press...... ;-)

Bei der Marktlage ist es kein Wunder das es der Immobilienmarkt es sogar im Boulevard immer öfter auf die Titelseiten schafft...... Und wenn es weder Beckham, Moss, usw auf Platz 1 der Yellow Press schaffen muß schon ungewöhnliches passieren..... ;-)

Tomorrows headline will be including Northern Rock ( wich had an 18.9% share of UK net mortgage lending ) and the bank run ....... Make sure you read the updates in the comment section. This story has some extra large legs......

Die nächste Überschrift enthält sicher schon Northern Rock (die immerhin knapp 19% Marktanteil innehaben oder sollte ich besser sagen hatten) und den"Bankensturm"..... Bitte lest zum Thema auch die Updates in den Kommentaren.... Diese Geschichte wird uns noch längere Zeit verfolgen...

What happend to the "Virtuous Circle" from Northern Rock...... ? Looks it is now more a "Vicious Cirlce"

Was ist bloß aus dem gerühmten "Virtuous Circle" von Northern Rock geworden.....?

FT The Bank of England will on Friday provide emergeny funding to rescue Northern Rock, a leading UK mortgage lender that has fallen victim to the credit squeeze triggered by the US subprime meltdown.

Northern Rock, which had more than $200bn in assets at the end of June, is the first UK financial institution to be propped up since the BoE in 1998 revised the rules under which it would act as a lender of last resort.

14. In exceptional circumstances, there may be a need for an operation which goes beyond the Bank’s published framework for operations in the money market. Such a support operation is expected to happen very rarely and would normally only be undertaken in the case of a genuine threat to the stability of the financial system to avoid a serious disturbance to the UK economy.”

>Just a few days ago Mervyn King, the governor of the Bank of England said this

>Vor ein paar Tagen hatte Mervyn King, the governor of the Bank of England folgendes zu sagen

In an unusual public display of discord, the British central bank criticized other central banks yesterday for injecting cash into the financial system to help stabilize credit markets, saying that such a policy amounted to a bailout of investors who made bad decisions.

The main thrust of his written testimony to Parliament, however, was a sharp warning about “moral hazard” — a term used to describe the downside of policies that effectively rescue investors when their bets turn out wrong.

“The provision of such liquidity support undermines the efficient pricing of risk by providing ex-post insurance for risky behavior,” Mr. King wrote. “That encourages excessive risk-taking and sows the seeds of a future crisis.”

> Look at the next chart and watch what the housing bubble has done since they tapped the "lender of last resort" rule the last time in 1998.... Got gold....?

> Guckt Euch an was der Immobilienmakt seit dem letzten Eingreifen der BOE im Jahr 1998 performed hat...... Got gold...?

The Bank is expected to say on Friday that a similar facility is available to any other institution facing short-term difficulties.

> When i look at this chart they should worry about the longer term problems....

> Wenn ich mir diesen Chart ansehe glaube ich zudem das die wirkliche Problematik eher langfristiger Natur ist......

Bloomberg is reporting this
The Bank of England is confident about the quality of Northern Rock's mortgage book, the FT said. The lender has struggled with refinancing obligations, including mortgage- backed securities, the report said.

> Confidence in a bank that is offering products like this ?

> Vertrauen in die Kreditbücher einer Bank die Produkte wie dieses begeben ?

Say the value of your property is £100,000. You could get a secured mortgage of up to £95,000. And have the facility to borrow up to £30,000 unsecured loan for anything else.

You can draw on this £30,000 as it suits you. So, you might need £10,000 now and hold £20,000 in reserve.

> Too bad that they didn´t include the above 100% financing in the following chart... ;-)

> Schade das Northern im Chart nicht ebenfalls die 100% plus Finanzierung aufführt..... ;-)

> On top of this they seem to very optmisitic about the quality of their books...

> Zudem erscheint mir die Bank doch recht optimistisch was die Qualität Ihres Kreditbuches angeht......

The charge for loan loss impairment amounted to £56.8 million for the first half (2006 first half - £44.5million) representing 0.12% of mean advances to customers (2006 first half - 0.12%).

The combination of high quality lending, low interest rates, low early arrears and continued strong average LTV of the portfolio have continued to contain the levels of loan loss impairment provisions required for residential mortgages. Write offs in the first half amounted to £8 million representing only 0.01% of outstanding residential mortgage balances.

We do not expect to see a higher impairment charge in the second half than in the first half of 2007

> When i look at the growth rate it it clear that have been offering very agressive products.... I´m not sure if they deserve the help......"Moral Hazard" Mr. King?

> Wenn ich mir die Wachstumsraten ansehe ist klar zu erkennen das gerade Northern Rock ganz besonders agressiv im Markt unterwegs gewesen sein muß. Warum gerade dieser Spieler die Hilfe verdient......

The loan will be made at a ``punitive rate of interest,'' the British Broadcasting Corp. said.

``If someone was struggling and had to go to the Bank of England for assistance, Northern Rock would be first in the queue because of the way they fund their mortgages,'' Ian Murrell, a director at Wills & Co. stockbrokers in London, said on Thursday before the BBC report. ``It's all funded in the money markets,'' he said.

> No wonder that there is a good amount of mistrust between UK banks.....

> Wenig verwunderlich das es ein erheblichen Mißtrauen zwischen UK Banken gibt....

Northern Rock shares fell 4.9 percent to 639 pence yesterday, the lowest since March 2003. The stock has dropped by half this year, valuing the lender at 2.69 billion pounds ($5.45 billion) and making it an attractive acquisition target, MF Global Securities Ltd. analysts said Wednesday. The stock is the worst performer of the nine members on the FTSE ASX Banks Index.

You can add another 25% haicut......

Yesterday's action by the U.K. central bank was its first to help credit markets since the subprime market collapsed. Governor Mervyn King yesterday indicated the bank won't go as far as the European Central Bank and the Federal Reserve in helping banks cope with the credit rout because policy makers can't afford to ``encourage excessive risk taking.''

Commercial banks, which agree to hold a specific amount of money at the Bank of England at the end of each month-long maintenance period, can now undershoot that target by 37.5 percent to free up cash if needed. That compares with the usual limit of 1 percent.

> After reading all this i have to admit that my respect for Mr. King and the BOE is deteriorating significantly.......But as long as this comment is true "Northern Rock collateral to be similar to euro-zone banks" he is not worse than Trichet ( but this should be no compliment)....Too bad that nobody knows the exact details. The official BOE release does not provide further information ...... And the BOE should not complain about the fact that after their "U-Turn" the speculations are rampant...

> Alles in allem bleibt festzuhalten das mein Respekt für Herrn King und die BOE erheblich gelitten hat.....Aber solange diese Aussage zutreffend ist "Northern Rock collateral to be similar to euro-zone banks" ist er zumindest nicht schlechter als Trichet ( was aber kaum als Kompliment aufzufassen ist).... Dumm nur das keinerlei weitere Details bekanntgegeben worden sind. Die offizielle BOE Mitteiling hüllt sich dazu in Schweigen. Und nachdem die BOE eine solch dramatische Kehtwende binnen weniger Tage hingelegt hat darf man sich nicht beschweren wenn die Spekulationen ins Kraut schießen......

Disclosure: Short Pound vs €, long Gold, Goldmines/Hui, NAK

Commercial property "Dizzying heights" UK / Economist

It looks like the commercial real estate sector in London is as mad as the residential sector. This also fits perfect with the latest news like So Many Deals, So Much Debt ( The rise and possible fall from Harry Macklow in just 6 month) & Commercial Real Estate Prices May Drop 15% in Next Year that are coming from the US commercial real estate sector

Es scheint fast so als wenn es der gewerbliche Immobilienmarkt dem Wohungsmarkt in nichts nachsteht..... Das reiht sich zudem nahtlos an die letzten Meldungen wie z.B.So Many Deals, So Much Debt ( Die Geschichte eines Immobilienmoguls der binnen 6 Monaten alles zu verlieren droht) & Commercial Real Estate Prices May Drop 15% in Next Year die wir aus den USA zu hören bekommen.

London's office prices are starting to decline
THE names of the streets that neatly divide Canary Wharf—West India Avenue, Heron Quays—point to the remarkable story of the rise and fall of London's docks, once the world's busiest, and their reinvention as a global financial centre. The towers that now soar above them provide more than a parable of capitalism's cycles of creation and destruction and the notorious booms and busts of London's commercial-property market, but may also carry a far older lesson: that the higher one climbs the farther one can fall.

For much of this year London's commercial-property market has been scaling new heights. In April HSBC, a British bank, sold its office tower in Canary Wharf to Metrovacesa, a Spanish firm, for £1.1 billion, the most ever for a British building.

From the FT

Experts said this trend will mean banks will have to lend at higher rates. It also means some lenders have been stuck with loans on balance sheets. They include HSBC, which provided £800m of debt for Metrovacesa, the Spanish group, to buy its headquarters for £1.1bn. That was in April but HSBC has been unable to complete a CMBS refinancing..

..RBS estimates that European issuance was just EU1.5bn (£1bn) in July, compared with EU14.6bn the previous month and EU11.3bn in July 2006 - and spreads have risen.

This topped the £690m that Citigroup's London office was worth when it was
bought as part of a package by Royal Bank of Scotland in 2003. IPD, a data provider, reckons that office prices rose at an average rate of 10% a year during 2004 and 2005 before jumping 17% in 2006.

One reason for this surge in prices is that a shortage of office space has pushed rents to record levels. Hedge funds and investment banks have added thousands of employees, while developers, stung by previous busts, have been slow to build new space. One hedge fund is understood to have recently agreed to pay as much as £135 per square foot for swanky offices in St James's, making its new pad the priciest office in the world.

> But for how long? See the image of the future "City" skyline and compare this to the current one "Old Vs New Skyline" ......

> Aber für wie lange noch?Vergleicht bitte wie die zukünftige Londoner "City" Sklyline aussieht "Alte vs neue Skyline"

Deals such as these are for the very best offices. But even including humbler accommodation, London's West End still has the world's most expensive office space, according to Jones Lang LaSalle (JLL), a consultancy. Rents for swish offices in the West End have climbed 25% in the past 12 months to £1,200 ($2,400) per square metre. This is far higher than in any other financial and political centre. In Moscow rents run to about $1,500, JLL reckons; $1,400 in Hong Kong and $770 in midtown Manhattan.

> What will happen when the "boom" in the financial markets will end or even worse will reverse..... Should be good news for the sector......

> Was wird wohl passieren wenn der "Boom" an den weltweiten Finanzmärkten abebbt oder was einige für unmöglich halten siech gar nis negative umkehrt...... Das dürfte dem Sektor besonders gut bekommen ......

But the boom is now ending. On August 16th Stephen Hester, the chief executive of British Land, said he expected a fall in office prices. His firm, the biggest landlord in the City of London, is now one of the capital's biggest sellers of property. CB Richard Ellis, a consultancy, has meanwhile warned its clients to expect the prices of offices, shops and factories to fall

This is because investors have driven prices too high, too fast. IPD reckons that yields on commercial property have fallen from 6.8% at the end of 2001 to 4.5% by the end of June, which means that they are now 1.7 percentage points below the cost of borrowing (see chart).

Making matters worse is the turmoil in credit markets. This has not just driven up the cost of money, it has also made banks choosier about whom they lend to. Alastair Hughes of JLL says deals are taking longer to complete and some are falling apart as banks become more cautious.

Prices of the most expensive offices have not started falling yet, but those of shops and factories started to slip in July, according to IPD. Analysts at HSBC note that five of Britain's biggest institutional investors have reduced their property exposure since the start of the year, reversing a five-year flow of money into the sector.

Whether office prices will have a hard or soft landing is unclear. In the past investors in commercial property were somewhat insulated from market fluctuations because most tenants were locked into long-term leases. But this is no longer the case.

Between 1995 and 2005 the average lease length declined from 13 years to less than 5 years. If demand falters, then rents, and property values, may tumble as quickly as they have climbed.

London Calling....Bubble Capital Of The World

The headline from the Bloomberg Story says it all.......

Die Überschrift des Bloomberg Reports sagt alles.....

"Home Craze Gazumps London With Record Prices, $500,000 Parking "

A confluence of powerful forces from low mortgage rates to Russian petro-riches to the teeming wealth of the City of London, Europe's largest and most dynamic center of finance, has supercharged home prices across the British capital.


The average price of prime London homes, the ones brokers consider the most desirable, has soared 254 percent since 1997,

Up, Up, Up
Defying predictions that the market would sputter, that average rose 28.7 percent in 2006, the steepest increase since 1979, and then jumped 18 percent during the first half of this year.

The decade-long leap in prices has made London the most expensive city in the world for high-end homes -- costlier per square foot than Monaco, New York, Hong Kong or Tokyo, according to Knight Frank, which says prime London houses cost about 5 million pounds and prime flats run about 2.5 million pounds. The most-sought-after property in areas such as Kensington and Chelsea, the priciest of London's 32 boroughs, sells for an average of 2,300 pounds a square foot, according to Knight Frank.
Risks
The unprecedented surge has brought with it unprecedented risks. Blair's successor, Prime Minister Gordon Brown, must now contend with a host of dangers -- from accelerating inflation to rising interest rates, to mounting mortgage debt -- that could puncture the housing market and threaten the nation's longest period of economic growth in 200 years.

The housing market hasn't been this heady since the 1980s, when prices almost tripled. That boom, touched off by falling interest rates and rising stock prices, ended when a subsequent increase in inflation drove interest rates as high as 15 percent.

London home prices sank 27 percent from December 1988 to December 1992.

Now, the thunderheads are gathering once again. As the U.S. Federal Reserve battles a subprime mortgage crisis, the Bank of England is tightening credit to combat inflation. The U.K. central bank has raised its benchmark lending rate five times since August 2006, pushing that rate to a six-year high of 5.75 percent.

Squeezing Borrowers
Tightening credit will squeeze people who've gone deeper than ever into debt in order to buy homes. Since May 1997, the amount of U.K. mortgage debt outstanding has ballooned, soaring 168 percent to a record 1.12 trillion pounds as of May 30, according to the Bank of England.


British homeowners have never been so stretched. A decade ago, first-time buyers typically took out mortgages equal to 2.4 times their annual salaries. Today, that figure has climbed to 3.2 times. About 120 billion pounds of short-term fixed-rate mortgages may have to be refinanced this year at new, higher rates.

London, long attuned to old money and social class, is increasingly a city divided by new wealth. The capital is being split between the rich, who can afford homes, and a growing number of ordinary folks who can't.


Foxtons Frenzy
No broker has fed the frenzy like London-based Foxtons, which has helped drive up prices and, in the process, its own commissions, by inflating home valuations, wooing buyers and sellers -- and pushing agents to close, close, close.

This year, Foxtons itself, along with another British property broker, Countrywide Plc, was gobbled up. The buyer in both cases was the new power in global finance: private equity. London-based buyout firm BC Partners Ltd. bought Foxtons from its founder, Jonathan Hunt, in May for about 390 million pounds. New York-based Apollo Management LP bought Countrywide in May for 1.07 billion pounds.

> Another "clever" Private Equity buyout....

> Sieht nach einem weietern "spitzen" Private Equity Deal aus.....

Hunt's exit is a bad sign, says Peter Nicholls, who sold his own London real estate firm, Royston Estate Agents Ltd., to rival Douglas & Gordon Ltd. in May for an undisclosed price. ``When Jon Hunt sells, you know the market's going to be in trouble,'' Nicholls, 44, says.

> The Quality Of Living Survey doesn´t help to explain the excess in the London property market.....

> Die o.g. Studie über die Lebensqualität kann den Wahnsinn nicht erklären....

Her advice: Buy now, before prices rise even more. People who are unwilling to pay top dollar can end up getting gazumped.

Apartments in the glass-and-steel complex, scheduled for completion in 2010, have sold for a city-record 5,000 pounds per square foot, according to Edward Lewis of London-based Savills Plc, one of the brokers contracted to sell the 80 homes in the development.

Aston Martins
The two-bedroom flat, adorned with silk-and-wool carpets, a white Yamaha grand piano and a bespoke bar, was for sale for 6 million pounds in late June. A parking spot in the garage, next to three Aston Martins, two Ferraris and a pair of Rolls-Royces, costs an extra 250,000 pounds.

He's still bleary-eyed from a trip to Moscow where, he says, he pitched six Russian billionaires on the London market. To the east, a thicket of 30 construction cranes rises around the dome of St. Paul's Cathedral, Christopher Wren's 17th- century masterpiece.

At nearby Millennium Bridge, on the River Thames, developer Amir Zarbafi is converting a building that once housed a tea company into luxury flats. Zarbafi, 43, bought the building in 1997 for 3 million pounds. It's worth 50 million pounds now, he says. Zarbafi says he's stunned by the prices that people are paying for homes. ``But I haven't seen anything that suggests the momentum is stopping,'' he says.

Prophets of Doom
People have been warning of doom for years. So far, the market has confounded home buyers and research analysts alike.

Former JPMorgan Chase & Co. banker Mario Vaccarino says he bought a three-bedroom flat overlooking Porchester Square Gardens, in west London, for 275,000 pounds in 1998 and sold it for 420,000 pounds in 2002, when he moved back to his native Italy, figuring prices had topped out.

``I thought prices were going to fall,'' Vaccarino, 33, says. Wrong. His old flat is now worth about 770,000 pounds, Marsh & Parsons broker Keith Gorny says.

As prices have spiraled higher, a new breed of London real estate speculator has emerged. Londoners who can afford to buy several homes are snatching them up and then renting them out, a strategy known as buy-to-let. Nationwide, the value of outstanding mortgages for this sort of purchase rose 29 percent to 94.8 billion pounds in 2006 from the previous year, according to the Council of Mortgage Lenders.
`Still Crazy'
Another time, a Russian businessman asked her to find a 1 million-pound flat for his 20-year-old daughter and ended up spending 6 million pounds.

All the same, Fatemi knows firsthand how frustrating it can be to find a home in London these days. She bought a flat near Regent's Park last December for 452,000 pounds. It's now worth 550,000 pounds, she says.

``It was the most horrific thing I've ever been through,'' Fatemi says of the purchase. She says she had to fend off seven rival bidders.

`Unprecedented Market'
Des Forges, the Knight Frank broker, has played the market too. He bought a home for 490,000 pounds in 2001 and sold it in June for 1.05 million pounds. He's moved up to a larger, 1.4 million-pound house in Hammersmith. ``We're in an unprecedented market,'' he says.

London's Future
The ground-floor maisonette -- with a sweeping, cantilevered walnut staircase, storage for 1,200 bottles of wine and a 42-inch (1-meter) plasma TV hidden behind a walnut panel in the master bedroom -- is on the market for 3.95 million pounds. Des Forges says an Italian banker and his wife have bought one of the places upstairs for 5.75 million pounds. An Israeli couple has purchased another for 4.7 million pounds.

When des Forges looks at buyers such as these, he sees the future of London and its housing market. London, a global nexus of finance, law and media, is luring the best and brightest from around the world, he says. ``I think it's just the beginning,'' des Forges says of London's ascent. ``Where else is going to compete with it, really?''

> A sceptic could ask what happens when the financial sector is facing "headwinds". Looks like London would be suffering the most......

> Man sollte eher mal das Argument bringen was passieren wird wenn der Finanzsektor mal ins Trudeln kommt. London dürfte dann überdurchschnittlich hart getroffen werden.....

Disclosure: Short Pound vs €

Owning a Home in the Suburbs of London / NYT

the clash say it the best...... ( or maybe "madness" would be the better pick....:-)

die clash fassen es am besten zusammen...obwohl auch madness gut gepasst hätte...



Alexandra Gilmore’s three-bedroom home in Surrey, a suburban county about an hour southwest of London, could not be more different from the spacious house with a big backyard and lots of storage space in which she grew up just outside Dallas...



... and thanks to her new husband, Ms. Gilmore was able to climb aboard the property ladder in what is now the world’s most expensive market. The couple decided in November 2004 to buy a three-bedroom, one-bathroom house, with 2,200 square feet of living space, in a development in Reigate, Surrey......


She and her husband now commute to London by train, a journey that takes about 40 minutes from the Earlswood station near Reigate.

Ms. Gilmore said she fell in love with the house right away, even though it needed loads of work.

It was on the market for 219,950 pounds (about $440,000) but they were able to get it for 205,000 pounds (about $410,000) because of its dilapidated state......

She said they stayed with friends for nearly eight weeks while the worst of the renovations were completed. In all, she said, the work cost about 24,000 pounds (about $48,000).

“What’s great is that the house was recently valued at around 270,000 pounds” (almost $540,000), Ms. Gilmore said. “The houses in our development sell quickly — rarely staying on the market for more than six weeks. This is really because our development is a five-minute walk from the Reigate High Street, which has great shops and restaurants.”

But nothing in and around London stays on the market for long. In recent months the city has become the world’s most expensive property market, with buyers paying anywhere from $4,000 to $6,000 a square foot for ultraluxury housing in some parts of central London, compared with

$3,000 to $4,500 per square foot in Manhattan, according to the real estate agency CB Richard Ellis.

And real estate agents say that a lack of supply has resulted in some London properties changing hands in just 48 hours.

While prices throughout the country are not as robust, those in Surrey are almost at the same level as those in parts of the capital. And Reigate was one of the region’s top performers in 2006, with house prices rising by an average of 29 percent.

In Reigate, the average price of a detached, or free-standing, property is 509,508 pounds (more than $1 million); the average price of a semidetached house is 289,917 pounds (about $579,384); the average price of an apartment is 108,743 pounds (about $217,486). Ms. Gilmore’s home is what is called in Britain a mid-terraced house — a rowhouse — and is classified as semi-detached.

British Land warns property boom (may) be over

when the 2nd. biggest property company in europe speaks you better should listen. and it looks like times are getting tougher..... can´t wait fro the blackstone bid with a big premium.....:-)

here is the official press release (PDF) http://www.britishland.com/images/pressrelease130207.pdf

and when you read the stories under the label for uk and london you can guess that the peak is passed or at least very close.

wenn die zweitgrößte immobiliengesellschaft in europa spricht sollte man die worte besser ernst nehmen. und es sieht in der tat so aus als wenn die zeiten eher schlechter werden. ....kann kaum das blackstoneangebot inkl. satter prämie abwarten.......:-)

und wenn ihr euch die diversen geschichten unter den labeln zu uk und london durchlest kommt man zu dem gefühl das es wirklich nur noch gen süden gehen kann.

Net asset value, used to gauge the performance of U.K. real estate companies, dropped 0.9 percent to 1,610 pence at Dec. 31, the end of British Land's fiscal third quarter, the London-based company said today in a statement. Lehman Brothers had forecast 1,636 pence.

Central London offices are the best-performing type of U.K. commercial real estate. Offices in the West End, the most expensive in the world, returned 32 percent last year, compared with 18 percent for all U.K. commercial real estate, IPD said Feb. 1.

from the release: think you need to read between the lines.../zwischen den zeilen lesen...)

"Real estate markets are difficult to call at present.

The fundamentals remain strong. A healthy
economy, strong employment and a central bank determined to combat inflationary pressures are a good recipe for our business. ( just the same you can read in 99% of all press releases / das dürfte man in 99% aller veröffentlichungen lesen)

It means rental growth is available to boost returns. Solid asset backing and long-term dependable cash flows support property yields and give the prospect of total returns comparing fairly to bonds and equities on a risk adjusted basis.

On a sectoral view, expansion of London’s service industries and national consumer spending in positive territory underpin our customers’ ability to expand in the best space – which British Land is well placed to offer......

Thankfully, British Land remains positioned to produce growth and attractive returns in the more demanding markets in prospect. Our asset values are well supported – perhaps even conservative in places – and rental growth prospects are good.

Stephen Hester, chief executive, said: “2006 saw further property yield reductions, now twinned with a modest rise in bond yields to underline our own view that the property investment case can no longer rely on further positive yield shift.”....

Equally, those parts of the property market where price appreciationhas gone further than the fundamentals of customer demand and risk assessment support, maydisappoint some investors."

The portfolio focuses on areas where the principles of supply and demand are strong over the long term. Some 47% is invested in out of town retail properties, including Meadowhall Shopping Centre (one of only six regional shopping centres in the UK), 128 retail warehouses and 71 Superstores. A further 34% is invested in Central London offices and office developments, including Broadgate (the premier City office estate).



Key Facts
Value £15.9 billion Wholly owned portfolio
£13.4 billion Share of Joint Ventures and
Funds £2.5 billion
Annualised net rents: £643

who is buying reits when Institutional investors are net sellers?

now watch this chart since november and ask yourself who is buying when indeed the institutional investors are net seller .......... ? pure frenzy/speculation etc.

betrachtet diesen chart und fragt euch wer um himmels willen hat gekauft wenn in demselben zeitraum die institutionellen netto verkauft haben? der nackte wahnsinn, reine spekulation

Feb. 12 (Bloomberg) -- Deutsche Bank Private Wealth Management and MFS Investment Management are dumping shares of U.S. real-estate investment trusts just as Blackstone Group LP pays the most ever for a property owner. http://immobilienblasen.blogspot.com/2007/01/equity-office-38-billion-takeover-sign.html

Shares of U.S. REITs are the most expensive in more than two decades compared with Treasury notes after the five-year property boom. Real estate stocks have led the Standard & Poor's 500 Index higher this year on speculation takeovers will increase after Blackstone agreed to buy Sam Zell's Equity Office Properties Trust for $39 billion in the biggest-ever leveraged buyout.

``Sam Zell is probably the shrewdest operator in this field that there is,'' said ..... ``If he's selling, I don't think I want to be a buyer.'' ....

Institutional investors with $11.9 trillion in assets have been net sellers of REITs since November, ...... Shareholders sold as dividend yields on the trusts tumbled below those of government debt.

The average yield of U.S. REITs tracked by the National Association of Real Estate Investment Trusts, or NAREIT, fell to 3.78 percent at the end of January. That was 1.03 percentage point less than the 10-year Treasury note, the biggest discount since 1985, according to data compiled by Bloomberg. ....

Returns in the almost $500 billion U.S. REIT market quadrupled since 2000 amid the global property boom. ......

`Rich-Looking'
``The market has got ahead of itself for REITs,'' ..... ``It's rich-looking to me. "

U.S. REITs tracked by the Leuthold Group last month traded at an average of 18.8 times adjusted funds from operations. That's the highest since at least 1997 and almost 50 percent more than the average for the past decade.....

i remember back in the old days there was a net asset value to judge how cheap real estate was. than they moved to the pe, dividend yield and now they measure it with the ffo, FFO is calculated by adding depreciation and amortization expenses to earnings)! what´s next.......maybe they hire the accountants from "camp nelson".......

ich kann mich noch erinnern wie immobilien(aktien) zuallererst am inneren wert gemessen worden sind. danach kam das kgv, dann die dividendenrendite und nun nach dem ffo. schon günstig wenn man abschreibungen und instandhaltung einfach dazu anstelle von abziehen kann, oder? könnt euch die definition ja mal durchlesen. was kommt als nächstes....evtl. werden die buchhalter aus camp nelsen eingestellt......

"Funds From Operations. A financial measure used by REITs to define their operating performance. FFO is calculated by adding depreciation and amortization expenses to earnings. This gives an idea of the REIT's cash performance, which is a better measure of the REIT's performance than earnings, which include (often large) non-cash items."

`Shocked'
Benjamin Pace, who oversees $17 billion as chief investment officer at Deutsche Bank Private Wealth Management in New York, said he's been ``shocked'' by the run-up in REIT shares.

The last time REIT dividend yields fell as far below Treasury yields was during the seven years that started in November 1978.

The NAREIT index underperformed the S&P 500 during that span by 33 percentage points.

REITs in Asia and Europe also have reached records as asset prices in Japan rebounded and countries from the U.K. to Germany and Pakistan follow the U.S. in introducing property trusts.

The Bloomberg Asia REIT Index climbed 34 percent in the past 12 months and five of the 10 biggest gains were from Japan.

Tokyo Prices
Commercial land prices in Tokyo increased last year for the first time in 15 years, according to figures from Japan's government, attracting investors to Japan's five-year-old REIT market.

In the U.K., the FTSE All-Share Real Estate Index jumped 45 percent in 2006, outperforming a 13 percent gain in the broader market, before property trusts were approved on Jan. 1.

The gains pushed dividend yields in Asia and Europe even lower than in the U.S. Asian REITs yielded 3.26 percent last week, while those in Western Europe were 3.4 percent,

``One is hard pressed today to say that the REITs are a good value,''

Some investors who say REITs are overvalued expect that acquisitions will still inflate prices. The value of real estate trust takeovers announced last year more than doubled from 2005 to about $137 billion,

Run Over
``You can run against the trend and get run over by the herd,''

So far this year, $27.6 billion in deals have been announced, the figures showed.

New York-based Blackstone ..... will pay 33.8 times Equity Office's funds from operations....!!!!!!

London Rents
Dividend yields on REITs may rebound as five-year leases on office property signed at discounts in the wake of the Sept. 11 terrorist attacks get renewed at higher prices.

Midtown Manhattan rents climbed 19 percent to $62.07 a square foot from a year earlier, according to CB Richard Ellis Inc., the world's largest real estate consultant, in its semi- annual report in November.

In London's West End, the world's most expensive location, rents increased 24 percent to $212.03 a square foot. Office space in central Tokyo rose 12 percent to $145.68 a square foot, while Hong Kong jumped 35 percent to $116.25.

``It's not a cheap way to get involved in the real estate market,'' .....

``All the private-equity money to me is somewhat of a last gasp'' for the REIT rally, he said. ``If they want them that badly and if you're involved in that market, you're supposed to say, `By all means, have mine.'''

disclosure: short reit index / iyr

renting madness in costly london

i hope its not only me coming from a small city in germany that gets the feeling that something has gotten out of control.......same seems to be true for the commercial sector http://immobilienblasen.blogspot.com/2007/02/london-calling-commercial-real-estate.html

ich hoffe es geht nicht nur mir so (komme aus ner kleinen stadt in deutschland) um das gefühl zu bekommen das in anderen teilen der welt die dinge ein bißchen aus dem gleichgewicht gekommen sind. das gleiche gilt wohl auch für den gewerblichen sektor.


NYT LONDON — Siri Eklund looked at 54 apartments here before finding one with a perk that she simply could not resist: proximity to Britain’s first Whole Foods supermarket, scheduled to open in June.....

......renting her spacious two-bedroom flat in the Observatory Gardens complex just north of Kensington High Street, one of West London’s most popular shopping strips.

She pays a weekly rent of £802, or nearly $1,600, for her 900-square-foot home. “Rent is paid by the week here and not the month,” said Ms. Eklund, who was transferred to London in December 2005 to become senior brand manager for Moët & Chandon. “And renters — not landlords — have to pay the local property council tax here.”

The monthly rent works out to £3,208, or $6,309. And the monthly tax adds another £110, or more than $200, for a total of £3,318, or $6,525.

In comparison, rents in New York averaged $3,460 for a two-bedroom apartment in a building without a doorman and $5,346 for a two-bedroom apartment with a doorman, according to January 2007 figures from the Real Estate Group New York.

Still, Ms. Eklund’s rent seems nearly a bargain considering that London is now the world’s most expensive property market. With rents in the central part of the city having climbed 5 percent last year, a penthouse in nearby Knightsbridge might have a weekly rent as high as £15,000, or $29,000.

And when it comes to buying, things aren’t much better. Buyers pay an average of $5,860 per square foot for luxury housing in Central London, compared with $5,276 per square foot in New York.

The market is being driven by a variety of factors: generous salaries and bonuses, especially those being paid out by the capital’s thriving financial sector; demand from foreign buyers and renters; and a simple lack of supply. ( nobody thinks that these bonuses are unsustainable. i think its is fair to say that the almost perfect times for the financial sector cannot last forever......merkwürdigerweise hält jeder diese boni für unantastbar. und ich denke es ist objektiv zu sagen das dies art von perfekten bedingungen im finnazsektor nicht ewig halten werden.)

Yolande Barnes, director of Savills Research in London, said she expected both consumer confidence and appetite to remain high in the coming years.

She predicts that house prices in Britain will grow by an annual average of 6 percent over the next five years. “Growth will be even greater than this in the most supply-constrained locations, like London,” she said. ( very objective.........)

The pound is approaching the $2 mark for the first time since 1992; that strength is actually what is keeping Ms. Eklund from buying a home. “I’ve got my assets in dollars,” she said, “and so I’m waiting to see what the pound will do. Everything costs about twice as much in London, but salaries are only about 20 to 30 percent higher.”

When Ms. Eklund finally came across the apartment in Observatory Gardens, she had to bid against others, raising her offer three times in the process.

“In the end, I had to pay six months’ worth of rent in addition to a six-week security deposit in order to finally win the apartment,” she said. “It can be very challenging trying to rent in London.” ......