Zoltan Szelyes 
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The failure of the hybrid government-private mortgage finance model
Many are seeing in the global financial crisis the greatest example of the failure of unregulated free markets. However, these assertions do not withstand any in-depth review of the mortgage market structure. The financial crisis rather reveals the failure of the hybrid government-private mortgage finance model. Here, I am outlining, how the involvement of governments in mortgage markets can exacerbate the weaknesses of private market structures. It can even lead to an explosive amalgam that provides the basis for a perfect storm.
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Introducing RealEstate&Politics
I’d like to introduce RealEstate&Politics, a new subcategory of my blog that deals with the link between politics and real estate markets. I not only want to shed more light on the often opaque relationship between politics and real estate but also highlight some ideas, how the structure of real estate and mortgage markets could look like in the future. The latter is a highly political question as well.
Structural shifts in the global economy and CRE strategy
Significant structural shifts have started to unfold in the global economy after the financial crisis. These changes will also heavily impact midterm commercial real estate returns in a relative and absolute manner. Real Estate investors have to account for these shifts and need to adjust the regional and sectoral weights in their portfolios, if they want to reap the full benefits of the recovery in the commercial real estate markets. Read more…
Commercial Real Estate, Banking Failures and Opportunities for New Money
In this article I am highlighting the important link between commercial real estate (CRE) and banking failures. Though this financial crisis was not triggered by commercial but residential real estate in the US, one should recognize the broader importance of CRE on the financial sector. In my view CRE credit is not just a credit type as others like residential mortgages or credit card debt but can play at some times a pivotal role on the balance sheets of banks. That’s why commercial real estate credit has to be addressed in a particular risk management framework.The current situation in commercial real estate markets in the US and in some European countries is far from comfortable and negatively impacts the balance sheets in the financial sector. This leads to a paralysis of parts of the financial sector but creates at the same time vast opportunities for new money. A thoughtful research based approach identifying these opportunities and avoiding risks is the key to success for new lending.
Commercial real estate over the long run
Available time history for commercial property data is usually rather short. Time series indices that go back beyond 1980 only exist for a very limited number of property markets. So sometimes the only thing a researcher can do is to look at some economic or historical studies that refurbish informations and events of the past. A study by Wheaton et al published in the Real Estate Economics in 2009 sheds some light over the evolution of commercial property prices over the longer term. They analyzed the behavior of real estate prices for the Manhattan office market between 1899 and 1999. Such scientific studies are rarely noted among practitioners but can nevertheless yield valuable insights for investors. That‘s why I would like to discuss some results of this outstanding paper from the investors’ angle and augment the results with some own comments.
Real estate analysis after the burst of the global real estate bubble
It is straightforward to address the burst of the global real estate bubble and the importance of real estate analysis in the my first blog entry. The bubble in real estate wasn’t confined to the US residential market. There were signs of excesses in many real estate markets around the world. So at that time, when the inflow of capital in the sector was the main driver and prices just kept rising, research analysis seemed to be of minor value and importance. The traditional real estate saying Location, Location, Location was then replaced by Capital, Capital, Capital.