Instant Team Board of Directors in the United States Congress (U.S.) yesterday warned that the commercial real estate sector losses could jeopardize the banking system. According to the Panel, commercial real estate has reached USD1, 4 trillion will need to re-financing funds (refinancing in the next four years) to tie in with the loan maturity date. In his report, the Panel noted that half the value of real estate loans declined. “We estimate that for the non-performing loans will reach 200 U.S. dollars – 300 billion dollars in losses and threaten the 3,000 small and medium size banks do not have a sufficient proportion of business assets, said:” Panel.
The report is the White House and Congress signal that the commercial real estate before the deterioration in the credit market is expected to rebound. “We see the point of TARP (and problem assets relief program) declined and the economy a major challenge, said:” The U.S. Congress Elizabeth Warren, Chairman of the Panel. He added that this point, the United States needs a real estate credit recurrence of the problem the new system. In his research team found that in 2988 investment bank more than three times the area of commercial real estate loans to state-owned assets. One, 2500 memeliki The banking assets of less than $ 10 billion U.S. dollars.
The group also noted that the federal government should consider include the bank equity injection of other solutions small. Another step is to buy non-performing assets or loan guarantees. However, in the congressional session last fall, Treasury Secretary Timothy Geithner said the move was not practical for large-scale bank reviews, until a more detailed level. At the same time, real estate research firm noted that the outlook berasarkan research, in the U.S. bank’s potential losses could reach $ 50 billion, accounting for 60 percent of problem loans.
Commercial real estate is the next bubble to burst !
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Regardless of the reasons, I think there are three items which do not bode well for commercial real estate prices in the next few years. First and perhaps most overlooked, investment or income producing properties, during the boom years, where purchased more for appreciation, rather than “income”. In other words, many deals were justified by investors who were willing to forego a rate of return (income), for future price appreciation. But as its name suggests, this is not what “income producing property” is all about. If it doesn’t give you an income stream in good times, it sure won’t be able to in bad ones. Only a “flipper” can make money on appreciation, and the trick is to know when to get in and when to get out. Second, the credit crisis has reduced the chances of obtaining loans, and also the leverage previously afforded owners/purchasers. Less money means less deals, and more cash out of pocket. This can only lead to lower prices. Third, we are for now in a “new” economy (although Americans often prove to be driven by fads and can be short sighted), where we will consume less, which should mean less need for commercial space. If there is one truth that history makes clear over and over again, it’s that most sectors of the economy will move in conjunction with one another, not in spite of one another. No doubt prices are tied to supply and demand issues, but too much of a swing invites change. So when prices double and triple in one sector while the rest of the economy isn’t going in that direction, chances are some force will snap that imbalance back into its proper place in the overall economy. And that change can be from social, economic, and/or political means.
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