uk realestate, page-49

Picked this up from the GMG forum. An interesting read, and was the type of news story I picked I was looking ffor that may have influenced yesterdays fall across the REIT sector.

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Matthew Franklin and Bridget Carter | March 20, 2009
Article from: The Australian
WAYNE Swan has warned that property prices could fall "across the board" if the Senate does not back his plan to create a so-called Rudd Bank to protect commercial property owners from loss of foreign credit.

The Treasurer has guaranteed tight probity measures for the fund, insisting its governance rules have been designed with advice from "the best minds" in the business world.

But Malcolm Turnbull scoffed at Mr Swan's assurances yesterday, accusing Labor of embracing failure and waste of public money like "a dog returning to its vomit".

Earlier this week, the House of Representatives passed legislation establishing the Rudd Bank, which is formally known as the Australian Business Investment Partnership.

The $30 billion taxpayer-backed fund is designed as a contingency against the possibility that foreign banks, hammered by the global recession, could be required to repatriate credit.

The Government fears that if the banks withdraw credit from owners of properties such as shopping centres and office buildings, forced sales could hammer property values and put at risk 150,000 jobs in the commercial property sector.

The Opposition opposes the fund, which would be created with an initial $2 billion taxpayer contribution plus $500 million from each of the nation's Big Four banks. The fund could be boosted by a further $26 billion in government borrowings.

Mr Swan, intensifying pressure on the Coalition in the Senate to back the legislation establishing the fund, said yesterday that a run on commercial property would hit the entire economy.

"Foreign banks have not been able to guarantee to the Treasury they will keep funding syndicated loans in this country, and there is a need for such a vehicle," Mr Swan told parliament.

"If foreign banks do withdraw, then that will affect property prices across the board, and it will result in a massive increase in unemployment in this country."

Mr Swan rejected the Opposition's concerns about the governance of the fund, saying the funding decisions would not be made by politicians.

According to the explanatory notes attached the legislation, funding decisions will be made by representatives of the Government and each of the four banks. No money project will be funded without a unanimous agreement.

Mr Turnbull likened the fund to failed state-run banks under Labor governments of the 1980s.

"Talk about a dog returning to its vomit," he said, reprising a famous line of former Labor prime minister Paul Keating.

"The Labor Party goes back to the failures of the past."

Although there was continuing confusion in property circles yesterday about how the bank would work, major listed property trusts praised its planned establishment, while none would publicly admit they would seek to tap its funds.

Dave Noonan, national secretary of construction division of the CFMEU, said the union strongly supported the scheme, provided due diligence was carried out on the projects.