Globally, the real estate sector faces an estimated $175 billion in credit risk
- Countless loans on the brink of default with declining cash flow
- The end of the era of easy monetary policy in the world, a big blow to the property market
MUMBAI: Globally, the slowdown has spread from the housing market to the commercial real estate market, due to which there may be shocks in the credit sector. About $175 billion in real estate loans have come under stress, according to data compiled by Bloomberg. With high interest rates and ease of access to finance stalling, the real estate market has stalled and many lenders are forcing borrowers to sell assets, not just to face asset forfeiture.
Stress levels in Europe's real estate markets are at a decade high. A study said that this situation was created due to decrease in liquidity.
In the last 6 months of 2022, property prices in the UK have decreased by twenty percent. In America, this decrease was nine percent.
A slowdown in real estate purchases and a slowdown in commercial and residential real estate will affect spending in the economy, which will have an impact on jobs and growth.
Rather than easing pressure on real estate, interest rates are making it more challenging, the report noted. Countless loans are on the verge of default. These loans have come under pressure as cash flows dwindle. In Europe, one in ten corporate loans have already come under pressure. Loans in the real estate sector are under the most pressure compared to other industries.
The report also notes that the sudden tightening of monetary policy after more than a decade of easing has left numerous commercial real estate companies in limbo.
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