[World economic crisis effects on the Real Estate market in UK]

By

Acknowledgment

This research would not have been possible without the help of my family and research supervisor so I would like to thank them for their support.

Declaration

I taken an oath that this research is my own work and it does not represent the ideas of the university. Moreover this research has never been submitted earlier for any educational purpose.

Contents

Acknowledgmentii

Declarationiii

Chapter: Introduction1

Purpose1

Research Aims and Objectives1

Hypothesis/Research Question1

Pre-Crunch Market Drivers2

The Credit Crunch2

The Credit Crunch and Property3

The Credit Crunch and Property Investment3

The Credit Crunch and Property Development4

Methodology4

References8

Chapter: Introduction

Purpose

The purpose of this report is to provide an assessment of the implications and consequences of the credit crunch for property in UK. In this initial section, we set out a framework for examining the impact of the credit crunch on the property market and the different channels through which impacts occur. Firstly, to set this in context and consider how the credit crunch has and will affect market drivers, we review briefly recent trends in the UK property market before the credit market crisis unfolded.



Research Aims and Objectives

In order to achieve the purpose, the following objectives will be addressed:

Research will be used to determine the impact of the credit crunch on the housing development industry

Research will be used to determine the operational and accounting impact of the credit crunch on housing development industry

Research will be used to determine the potential for the credit crunch to open up new financial opportunities for housing development industry

Hypothesis/Research Question

Research will be used to determine the impact of the credit crunch on the housing development industry

Research will be used to determine the operational and accounting impact of the credit crunch on housing development industry

Research will be used to determine the potential for the credit crunch to open up new financial opportunities for housing development industry

Pre-Crunch Market Drivers

The time period from 2004 to 2007 marked history for the property investment performance in the united kingdom, in the context of exceptionally high liquidity in world financial markets. Trends in property investment mirrored, and were shaped by, conditions in other investment markets. In the period following 9/11 and the dot.com crash, central banks responded by cutting interest rates to very low levels. At the same time, high volumes of savings in the world economy, partly generated by huge Asian trade surpluses, attempted to secure the highest possible returns and a 'hunt for yield' developed which pushed down bond yields and flattened yield curves1. This global 'hunt for yield' by investor's compressed yield spreads in a range of markets - emerging market debt, corporate bonds and property. Risk premia were eroded as investors projected conditions of cheap money and low volatility into the future.

The Credit Crunch

The US subprime mortgage market collapse affected the whole financial market and it left its marks on the whole world including banks and investors. This also affected the debt products all over the world. Estimates of the total losses resulting from sub-prime mortgage problems vary but $400 billion has been ...