John Wiley & Sons Property Boom and Banking Bust Cover A fascinating analysis of the critical role commercial property investment played in the economic bo.. Product #: 978-1-119-21925-5 Regular price: $80.28 $80.28 In Stock

Property Boom and Banking Bust

The Role of Commercial Lending in the Bankruptcy of Banks

Jones, Colin / Cowe, Stewart / Trevillion, Edward


1. Edition December 2017
216 Pages, Softcover
Wiley & Sons Ltd

ISBN: 978-1-119-21925-5
John Wiley & Sons

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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.

List of figuresix



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


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


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


8 Conclusions169


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


Colin Jones, PhD, 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, PhD, 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.

C. Jones, Heriot-Watt University