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Is the UK property sector on the verge of financial meltdown?

As we see the likes of Land Securities coming to the market for effective rescue funding there is a growing concern that the UK commercial and domestic property markets are on the verge of meltdown. While the domestic market has been declining for well over 12 months now, there are growing concerns that the potential problems in the commercial property market could dwarf those in the domestic market in due course.

As we have covered before, there are rumours that UK banks have exposure of hundreds of billions of pounds to the commercial property market, of which many loans are expected to be reassessed in the short term with the potential for significant write-downs. The demise of the UK economy has seen rental income collapse in many parts of the UK which has impacted upon the commercial property sector and taken away a vital form of debt funding for companies such as Land Securities.

The problem now is that as property companies look to dispose of their assets to raise potentially life saving money they are placing further pressure on the market and pushing prices lower and lower. This self fulfilling prophecy could in effect increase debt in real terms as asset values head south and debts are only reduced by a small amount.

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