When Rupert Nabarro, one of the founding directors of the Investment Property Data Bank (IPD), polled the audience of 250 real estate professionals at the IPD European Property Investment Conference in Berlin about their outlook for near term profits in the UK real estate market, the response was a bit somber. No one expected profits to return in 2008, while a third felt 2009 and the majority believed this would not happen until 2010.
By Bernd Struben, Senior Editor REP
The downturn in the UK property market followed close on the heels of the US subprime crisis and resulting credit crunch. It has since spilled over into Ireland and now Spain, largely due to overleveraging on the part of buyers. One of the dangers of high loans and falling real estate values is that when the asset price drops below the amount of the loan, borrowers have a tendency to walk away from the loans rather than pay them off, as has been witnessed in the US housing market.
As more investors have defaulted on their loans, credit has tightened. Markus Leininger, Head of Corporate Banking in Europe for Eurohypo said that the days of billion euro deals are gone for now. Banks are forming clubs just for