November 19, 2007 (LPAC)--London commercial property market continues to collapse as banks put large leasing of new space in the City of London on hold. Furthermore, they are signing "flexible" leases for no more than 18 months rather that the normal 10 to 20 years. This is being seen as preparation for the big layoffs at the major banks as the collapse of the financial system continues. This will hit rent prices and therefore property prices.

City property prices are believed to have fallen already by 5 or 10% since spring, according to a report in The Times. Speculators who have in the last two years bought properties on yields that were below the cost of debt, based on the idea that price would go up, are all out of the business now.

HBSC, which sold its own office building in the Canary Wharf for 1.1 billion pounds, in fact loaned 800 million pounds to the Spanish Metrovacesa real estate company. It used this sale to make its books look better, but now it turns out they have not been able to sell this debt and will have to put it on their own books.