Credit freeze spreading property woes globally: James Saft

By James Saft

LONDON (Reuters) - The global credit crunch is spreading, adding commercial and residential property in Britain and beyond to its list of victims.

On the face of it, a prime London office building with an A-list investment bank tenant and a house repossessed from a subprime borrower in California may have little in common.

But such has been the force of the re-pricing of credit that properties of all sorts in many places have become markedly more difficult and expensive to finance over the past month.

The transmission mechanism is not just lenders pulling in their horns from property, but an unwillingness of banks to lend to each other that is driving up the cost of money for all.

It is also true that in many places, notably Britain and Spain, both commercial and residential property have been in a speculative bubble pretty similar to the one now unwinding so painfully in the U.S.

Similar, in that property investment everywhere was fuelled by global markets with super-easy borrowing terms.

Similar too, in that many property markets were, in the final analysis, going up because they were going up. People were buying because they expected future gains and feared missing out.

But the credit crunch is now having a real impact.