The credit crisis will likely be short-lived, according to Ian Whittock, managing director of research and strategy at ING Real Estate. 'Short term there will be some bad news as bad debts reveal themselves. An inflationary threat is also definitely out there. But the Fed estimates that about $100 bn is tied up in bad debts compared to $1 trn at the time of the hedge fund crisis following the collapse of LTCM. Moreover, corporate profitability is high and debt levels are low. And there is still a lot of money around.'
The credit crisis will likely be short-lived, according to Ian Whittock, managing director of research and strategy at ING Real Estate. 'Short term there will be some bad news as bad debts reveal themselves. An inflationary threat is also definitely out there. But the Fed estimates that about $100 bn is tied up in bad debts compared to $1 trn at the time of the hedge fund crisis following the collapse of LTCM. Moreover, corporate profitability is high and debt levels are low. And there is still a lot of money around.'
Whittock added, however, that there can be no absolute certainty. 'Total return forecasts are down for every international market. The greatest risk is a possible recession in the US and falling consumer confidence.'
Whittock was speaking at a client conference in Amsterdam last week organised by ING Real Estate Investment Management (ING REIM). Investors are currently coming out of a very 'benign period', he added. 'Thanks to low bond yields and the low cost of debt, we have recently experienced what is probably the great investment market of all time. But the period of excessive returns is over. The risks are becoming greater.'
While all asset classes are currently overvalued, Whittock argued that property still stands up well, thanks not least to the fact that the sector is relatively inflation proof due to indexed leasing contracts. Of the international property markets, Whittock believes that Europe currently looks the strongest. 'Unemployment is high, but the economy is growing. As a result, Europe has a greater capacity to sustain lower interest rates than, for example, the UK or US.'
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