A fascinating analysis of the critical role commercial property investment played in the economic boom and bust during the global financial crisis
The unprecedented financial boom stretching from the mid-1990s through 2008 ultimately led to the deepest recession in modern times and one of the slowest economic recoveries in history. It also resulted in the emergence of the draconian austerity policies that have swept across Europe in recent years. Property Boom and Banking Bust offers an expert insight into the complex property market dynamics that contributed to the Great Financial Crisis of 2008 and its devastating economic consequences. It is the first book to focus on a woefully underreported dimension of the crisis, namely, the significant role that lending on commercial property development played in the crisis. Among other key topics, the authors explore the philosophical and behavioral factors that propelled irresponsible bank lending and the property boom; how it led to the downfall of the banks; the impact of the credit crunch on the real estate industry generally in the wake of the financial crisis; the catastrophic effects the property bust had on property investors, both large and small; and how the financial institutions have sought to recover in the wake of the financial crisis.
* Provides valuable insights into what happened in previous booms and busts, particularly in the 1970s and 1980s, and how they compare with the most recent one
* Offers an expert assessment of the consequences of the global financial crisis for the banking system and the commercial property industry
* Examines strategies banks have used to recover their positions and manage the overhang of indebtedness and bad property assets
* Addresses strategies the real estate industry have used to recover from the collapse in property values
Written in an accessible style, and featuring numerous insider case accounts from property bankers, Property Boom and Banking Bust disentangles the complex, tightly-woven factors that led to the Great Financial Crisis of 2008, while offering powerful lessons for property industry professionals on how to avoid having history repeat itself.
Spis treści
List of figuresix
Acknowledgementsxi
Glossaryxiii
1 Introduction1
Sub?-prime Lending Enters the Financial Vocabulary2
The Global Extension5
Commercial Property Market Context6
Commercial Property’s Role in the Wider Economy13
Property Investment and Short?-termism14
Measuring Commercial Property Market Performance14
Book Structure16
2 Long?-term Changes to Property Finance and Investment21
The Changing Role of the Banks in the United Kingdom21
Property Development and Investment Finance25
The Changing Investment Landscape of the Non?-banking Financial Institutions29
The Other Main Players in Commercial Property30
The Changing Face of Institutional Property Investment31
Limited Partnerships34
Jersey Rides to the Rescue37
Unit Trusts and Indirect Investment39
Conclusions41
3 Economic Growth, Debt and Property Investment through the Boom43
Global Economic Upturn and Debt Accumulation43
The Property Boom and Escalating Debt46
The Cost and Role of Debt52
Development and its Finance in the Noughties Boom57
The Weight of Money and Moving up the Risk Curve61
Conclusions63
4 The Anatomy of the Property Investment Boom65
Commercial Property, the Macroeconomy and Globalization66
Global Property Upswing68
Market Trends in the Property Boom – Was Something Different this Time?71
UK Investment Trends76
Lending To Commercial Property in the United Kingdom82
A Property Boom in an Irrational Market83
Summary and Conclusions88
5 The Global Financial Crisis and its Impact on Commercial Property91
A Crisis Unfolds92
The Impact on Global Property Markets95
Capital and Rental Values in the United Kingdom Post 200798
But This Time the Bust Was Also Different100
Investment Trends and Capital Value Falls106
Changing View of Risk112
Summary and Conclusions114
6 Property Lending and the Collapse of Banks117
The Crumbling of the UK Banking System118
Royal Bank of Scotland121
Halifax Bank of Scotland122
Britannia Building Society and the Co?-operative Bank130
Dunfermline Building Society131
Irish Banking Collapse132
US Experience136
Discussion and Conclusions139
7 Aftermath and Recovery143
The Macroeconomic Context144
Property Market Trends147
Bad Bank Debts and Impairments: The Road to Redemption151
The Response of Property Investors, Property Funds and Property Companies158
Property Lending Post?-GFC161
Implications for the Pricing of Commercial Property and Investment162
Conclusions166
8 Conclusions169
Globalization171
The Boom and Bust through the Prism of Valuations173
Role of Banking173
Irrational Exuberance174
Could It Happen Again?176
What Can Be Done?177
Final Thoughts179
References181
Index191
O autorze
Colin Jones, Ph D, is Professor of Estate Management in the Institute for Social Policy, Housing, Environment and Real Estate at Heriot-Watt University, Edinburgh, Scotland, UK. He has published widely on spatial commercial, industrial and housing property markets, urban regeneration and the economics of housing policy.
Stewart Cowe worked for thirty years in the investment division of Scottish Widows Investment Partnership.
Edward Trevillion, Ph D, is an Honorary Professor of Real Estate Investment and Finance in the Institute for Social Policy, Housing, Environment and Real Estate at Heriot-Watt University.
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