Gray: Real estate debt will hit banking sector

Martin Gray, manager of the Miton Special Situations portfolio, explains why high levels of real estate and consumer debt will cause further problems for an over-geared banking sector.

Valuations of ultra-prime commercial property have recovered their pre-crisis highs, while banks have been quietly extending loan repayment dates and rolling over interest due. But away from prime, things are likely to be coming to a head over the next couple of years as the level of repayment and refinancing of deals rises sharply. The industry has estimated that there is about $2,400bn of real estate debt to mature over the next two years, of which the vast majority is located in the US and Europe. There is a considerable amount of secondary assets to be dealt with, much of which...