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Manhattan facing bleak property future due to global finance troubles

On the residential front house prices have fallen 19% across the US and are down 10% in New York which is often regarded as being immune to national trends.

But now jobs losses on Wall Street are expected to mean more properties coming onto the market and fewer people able to get the finance to buy.

'Property prices will suffer from slashed bonuses, declining stocks and job severances,' said a spokesman for Miller Samuel, the New York based a real estate appraiser.

'A growing number of deals are said to be falling through due to difficulty in getting financing. These are largely at the middle of the market,' he added.

The company estimates that one in three new apartments in Manhattan are sold to foreigners, primarily Western Europeans.

In the commercial sector the collapse of Lehman Brothers and the bailing out of American International Group are expected to have a significant effect.

Some of the world's landmark buildings could come on to the market in a rare opportunity thrown up by AIG's forced asset sale. A 'for sale' list is being prepared and it is expected to include some of the company's $16 billion it holds in global property.

AIG has more than 53m sq ft of commercial property around the world, including its award-winning headquarters in Fenchurch Street, London, and its global headquarters in Manhattan which is an historic 66 storey 1930s building.

Lehman Brothers owned more than $32 billion of debt and equity assets which includes everything from land in California to apartment buildings in Boston and New York. These will now be liquidated, putting downward pressure on prices.

To make matters worse Lehman pledged many of its real estate assets as collateral on loans for desperately needed cash in the days before it collapsed. For example, Swedbank AB, a Swedish bank, was left holding 70 commercial loans valued at $1.35 billion, which were backed by properties including partially built developments. It is unclear if Swedbank will fund the balances to keep construction going.

In a worst-case scenario, in the New York region, commercial vacancy rates will hit 19% by 2011 and values will scale back over 13% through 2009, according to a projection released today by Property & Portfolio Research Inc.

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