The most worrying part about a CRE bust is the potential that individuals have unknowingly invested, through pension schemes, in products related to CRE loans, which will decline significantly in value as the bust takes hold.
Ireland, along with Spain and the UK, is the next stop on the credit writedown bus.
“Irish developers and banks are staring into a black hole of at least €10bn as the gravy train of shopping centre and office developments heads for what many believe will be a massive crash.
This black hole — which will become a reality this year if, as Davy predicted in its report last week, the value of Irish commercial property dives 20 per cent from its peak — will create unforeseen headaches for many.”
Banks with the most exposure are AIB (Allied Irish), UlsterBank/RBS, and Anglo Irish.