Billionaire investor George Soros is not confident about the US commercial real estate market according to a recent speech at a Washington forum. He stated “Commercial real estate has not yet fallen in value, it is inevitable, it is written, everybody knows it, there are already some transactions which reflect and anticipate it, so we know, they will drop at least 30 percent.”
Since 2007 the US commercial real estate market has already suffered tremendously, seeing values fall by 30 percent. Deutsche Bank also voiced their concerns about the sector when they stated that total returns in a commercial property index used by pension funds may decline as much as 11 percent in 2009.
When addressing the forum, Soros criticized US president Barrack Obama for moving too slowly in regards to re-capitalizing banks in the United States to help the flagging economy. He blamed the president for not moving fast enough to solve the current credit crisis when he took to the oval office for the first time.
He also stated that there would be a possibility that inflation in the US could once again take hold if the credit flow was to recover due to the sudden increase in the money supply from the Federal Reserve.
In their aim to help lower home loans and interest rates US central bankers have made the decision last week to buy up to $300 billion of long-term Treasuries and more than double mortgage-debt purchases to a total of $1.45 trillion.
Soros further stated in his speech: “Right now we are in a period of deflation, but it could easily tip over, where you are facing inflation. You are then faced with the prospect of draining money supply as fast as credit is created.”
Soros’ concerns only further reports of a flagging commercial real estate industry from late last year.
Photo credits: World Economic Forum via Flickr