The same interesting proposition arose from two separate meetings I had today, and that's close enough to a trend for me to share with you.
It centred (inevitably) on the issue of property sales initiated from banks. Leaving aside for a second whether these sales are at distressed prices, take it as read that banks will have to conduct some sales, even if they only drip through over the next five years.
Two different corporate financiers both raised the question of who is likely to benefit from these sales. The answer they arrived at is the large, established REIT, and not for the reason one might expect.
Their theory, based on discussions with bankers, is that, from a PR point of view, it is far more beneficial to work with blue-chip companies like Land Securities or British Land, because of the type of coverage these companies generate.
"Lloyds and RBS especially, will now have to deal with headlines in not just the FT, but the Daily Mail as well," one source says, "and if they are going to be selling assets that belong to the taxpayer, it looks much better to be seen to setting up a joint venture with Land or BL than being taken to the cleaners by the rapacious private equity guys."*
Its a compelling theory, especially when coupled with the fact that Lloyds has drafted Mark Collins, the former COO of LandSecs to work in its property business support unit. Don't write off the REITs just yet.
*The Property Finance Blog would like to point out that it realises that not all private equity houses are rapacious. Just some of them.
Average House Price in 1987 was £40k.
AHP in 1997 was £55k. {15k Increase over ten years.]
1997-2007 AHP's doubled then trebled then rose some more. 50-60% drop in house prices would return AHP in line with inflationary, historically sustainable levels compared against the average wage earner.
[Tokyo property prices have dropped 80% over the last ten years, and they are still out of reach of the average buyer.]
A house in the UK gets repossessed every 7 minutes.
Large numbers of houses are being kept 'off the books' of taxpayer funded banks, being sent to auctions, not meeting the undisclosed reserve price, then being sent back to auction, with a slightly lower reserve.
In other words the banks are trying to engineer a bottom. They dont have to sell them being taxpayer funded.
The taxes of FTBers are being used to prop up this unsustainable bubble.
[I have seen a converted barn in Lincolnshire go to auction 4 times, attracting a highest bid of £110k. It sold at peak for 330k in 2007.]
This is not a democratic free market. This is not capitalism.
This is Labour government Cartelism
The MP's and VI's are protecting their own interests.
Creating a vastly unequal and unfair society.
There is no impartiality in the UK. The politicians are criminals. In Cahoots with most of the media.
Why should the people who do not own houses, pay for your toxic housing debt?
At 36 years old, I come from a generation, who believes a person earning average wage should be able to afford an average house.
However Labours policies dictate that I should stay in debt bondage, or indentured slavery.
Created by Greedy Banks, and the Labour government.
I will never buy a house until they return to the 1999 sold price. Every FTB feels this way.
The housing crash is the recovery the economy needs.
And We need it now, rather then adopting a failed lost Japan style decade.