The danger in the background!

The real estate market is booming! And not just since the Corona crisis. As a result of the low interest rates and the economic stimulus programs of the central banks as a result of the financial crisis in 2008, concerns about monetary devaluation initially led to the need for real assets. With the increase in value that has been achieved since then, private property is increasingly becoming an investment and less and less a security object. After all, the interest rates are in the basement, so why not use the leverage with a debt financing?

The great unknown …

Accordingly, many banks have financed real estate loans. In the case of commercial real estate, it is now becoming apparent that this is not without risk. Especially with the Corona crisis, “home jobs” suddenly became very popular. While the employee can enjoy certain freedoms, the company saves money. Above all, this is the case in the medium term when these office workplaces are no longer required in the last known form in favor of working from home. The result is that the prices of commercial real estate are falling. However, the effects of the Corona crisis are also responsible. Rising unemployment in connection with corporate bankruptcies intensify this trend. The danger for banks now is that the loans they have issued will become non-performing, resulting in the risk of another financial crisis. However, there are many influencing factors here, so that it is difficult to come to a clear forecast. In any case, it doesn’t get any better when employees lose their jobs. Often real estate was financed by private sources, some of which were calculated “tip on button”. A loss of an annual bonus or even unemployment could put these loans in trouble.

Beware of being too optimistic!

Above all, the recently increasing optimism seems to be contagious. There are enough sources of danger that cannot be seen directly on the surface. One of them are, for example, loans that could become non-performing due to the Corona crisis and thus increase the risk of another break-in. In this respect, one should not completely ignore this influencing factor when making forecasts about the further course of the stock market!

I wish you a successful stock market week

Stephan Feuerstein
Leverage Certificate Traders

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