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European RE faces further 'haircuts', American guru warns
Date: 10 May 2011
The European real estate sector faces further 'haircuts' as the spectre of stafglation looms large, Reggie Middleton, a leading consultant credited with predicting the collapse of both Bear Stearns and Lehman Brothers, warns in the May edition of PropertyEU Magazine. 'I don't see how further devaluations are avoidable if interest rates rise and I think rates are almost guaranteed to rise,' he said. 'The NOI side of the equation is bound to take a hit as austerity plans and a sluggish economy equate to lower operating incomes.'

Middleton was the keynote speaker at a recent seminar in Amsterdam organised by ING Real Estate Finance on how to value real estate now and in the future'. In his presentation, entitled 'Brown roots, green shoots and the cycle of economic life: profiting when a centrally planned global economy has warped price discovery and disturbed the natural order of things', Middleton painted a sombre picture for the European real estate sector amid fears of debt contagion and stagflation.

The debt problems of the southern European countries could also result in extreme interest rate and currency volatility, which would make lenders shy and spike cap rates, he warned. 'This will dampen the commercial real estate market. We have seen this happen already in Japan, where a property bubble resulted in a bust that nobody wanted to acknowledge.’

The full interview appears in the May edition of PropertyEU magaziine. Click on the link below to subscribe
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