“Subprime” syndrome and Real Estate market in Europe

Implications: It is a very current and also quite important subject.

Analysis: Please don’t ask me, yes the “Subprime or credit crunch” syndrome arrived also to Europe, of course not directly but through the financial institutions’ door here, they will have to swallow huge financial assets write-offs. Some of this institutions, for instance in Germany, just saved themselves from collapsing by overhasty mergers. Not only the domestic Residential RE market, but also the Commercial one in Europe was surely suffering a bit in the second half of this year from a certain reserve by new mortgage loans and also higher interest rates.

Quite curious from my point of view remains the fact that everybody expected things getting worse mostly in the country where it came from, but it was not the case; European markets seem again to be more reactive or sensitive despite wealthy economical situation recovery. It is a little like that old well known adage about the half full or half empty bottle of wine. The former Fed Mr. Greenspan said recently that the risk regarding a slow down of the economic situation in the US remains by 50%. So a US citizen would say “Wow! We are lucky, we have still a 50% chance that things will get better”, on the opposite a European person would be more likely to say “what a pity, the risk tha everything is getting worse is 50%” that remains certainly a major difference between the two ways of thinking in the US and in Europe. “Think positive” is not only a Motto it’s also every day reality and surely a better and enjoyable way of life.

However the biggest remaining problem is now that trust between the financial world will have to be restored quickly, because the huge uncontrolled stocks volatility in general (rarely seen before) and especially the non ending falling of nearly all European Property, Housing, Homebuilders and Real Estate stock companies’ shares in the past months is more than incomprehensible. For many of them the market capitalization dropped (or even collapsed!) by far more than 50%, PER by far under 10 or sometimes 5 and even less, in comparison to mostly even better results. So each normal reasoning person and therefore of course also investor would or even should consider investment in RE stock shares now as huge or at least reasonable growth potential seems to be available, thus no need to invest anymore directly into (sometimes risky) Real Estate portfolios in 2008….wait and see!