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UK home prices may fall further: Blanchflower

Posted on 27 Oct 2009 | Comments Off

UK house prices are likely to reverse recent gains as the economy struggles to recover from recession, former Bank of England policy maker David Blanchflower said.

‘The reality is that the real economy is on its back,’ Prof Blanchflower said in an interview with Bloomberg Television in London yesterday. ‘If house prices continue to fall, as I believe they will, we’re going to see around three million people in negative equity’, where mortgage debts exceed the value of the property.

UK gross domestic product unexpectedly dropped in the third quarter, extending the recession to the longest since records began in 1955. Recent house price gains and a recovery in stock markets may be a bubble, Prof Blanchflower said.

‘We need to somehow or other get that economy moving again,’ said Prof Blanchflower, a Dartmouth College professor who left the Monetary Policy Committee in May. ‘The worry going forward is what are you going to do about all these folks who are in negative equity?’ Continue reading →

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Tagged UK Property, UK Property Market, UK Property Prices

US Reit results may sober up stock rally

Posted on 27 Oct 2009 | Comments Off

Most property-owning real estate investment trusts (Reits) will begin reporting third-quarter results this week against a backdrop of spectacular industry stock rallies even as rents and occupancy rates are falling.

Will weak fundamentals finally hurt the stocks during the worst commercial real estate downturn in about 20 years? ‘Underlying fundamentals over the last year probably will show up in a more pronounced fashion probably this quarter, compared with the somewhat benign numbers of the first couple of quarters,’ Michael Knott, senior analyst at independent research firm Green Street Advisors, said.

He noted that the sector is fairly valued.

Despite weak fundamentals, the stocks have rallied, with the benchmark MSCI US Reit Index up 10.4 per cent year to date and up 90.9 per cent since the low of March 6, when capital markets were at their tightest.

Fuelling the soaring stock prices is the ability of Reits to raise capital.

From Jan 1 through Oct 19, property owning Reits raised US$19.3 billion by issuing new shares and US$7.1 billion via corporate bonds, according to research firm SNL Financial. Continue reading →