Blackstone, the world’s largest investment company based in real estatefailed to repay a loan to buy an office building in Finland, and last month Moody’s downgraded loan in support of the German Brookfield construction complex. In Frankfurt, the Korean owners of the 45-story Trianon Tower have hired consultants to begin a €375 million secured debt restructuring process that will building. And Chinese investor Chung Kei is selling two of his buildings in a good area of ​​London to reduce his debt. These are the first signs of a crisis in the real estate market in Europe, which is going through new difficult times.

In a report published in February, the ECB warned of “growing pathologies” in European real estate.

As noted in a related article in the Financial Times, the question that now worries investors is whether these, for now, isolated cases of NPLs will expand and develop into a general industry crisis similar to the crisis of two years in 2008. -2009 that hit them European banks. And the risk is high for office buildings, which are the largest and most important part of the entire real estate market and are backed by $1.5 trillion in debt. Euro. In a related report published in February, ECB warned of “growing pathologies” in European real estate markets. production and contracting companies, as well as land and property owners, are already facing unprecedented developments since the start of the pandemic. However, the situation is now fundamentally different from the previous crisis, as property owners face rapidly rising interest rates and central banks made a concerted effort to stop its upward trajectory inflation.

Meanwhile, the recent banking crisis with the collapse of two regional American banks, as well as the Swiss giant Credit Suisse fears have intensified that credit may now become more difficult and more expensive. At the same time, real estate prices have fallen sharply in recent months, and in some areas it is now extremely difficult to sell an old house. At the end of last month, Citi Group analysts warned their clients that European property values ​​have not yet fully adjusted to rising interest rates and are likely to fall by 40% by the end of 2024. Speaking to a British newspaper, Mark Bladon said the head of real estate at Investec, stresses that “clear cracks are starting to open up.”

Prior to the 2008 global financial crisis, banks were offering mortgages that matched 80% or even 100% of the value of a property, sometimes because they overestimated the income the property could bring. However, a related study by Bayes Business School now concludes that European banks are unlikely to cover more than 60% of the property’s value in order to limit the possibility of discovering property debt that exceeds the value of the property. Most analysts do not see a recurrence of the financial crisis as bad loans undermine the capital adequacy of banks and sometimes lead them to bankruptcy. They predict, on the contrary, a long period of painful adaptation, rather than a short and sharp shock. Some investors, however, fear that this time things could go in the opposite direction: there will be a shock in the real estate market, which will hit the banks a little, but will deal a much more serious blow to property owners.