29 Jan '11, 5am

Why property is the financial system's Achilles heel

Banks are likely to take a harder line with an indebted sector still dealing with the troubled legacy left by past generations of investors and their lenders. Outstanding debt to global commercial real estate is estimated to stand at US$6.8 trillion ($8.7 trillion), according to DTZ, the property consultancy, with the majority located in Europe and the United States. Of this debt, more than one-third - US$2,400 billion - is due to mature in the next two years. This represents a huge refinancing burden for a sector from which most lending institutions are retreating, following a significant fall in values and a tightening in policies ahead of future banking regulations. Analysing the new debt available to replace the expiring facilities, DTZ estimates a funding gap of US$245 billion. Many of these loans were originated or refinanced at the peak of the market in 2006-07 then...

Full article: http://www.todayonline.com/Commentary/EDC110129-0000186/W...

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