Wednesday, March 17, 2010

MIPIM 2010: The domino effect

Wisconsin Real Estate MBAs report from MIPIM 2010:

Panel: Prospects for European Recovery - Economics & Implications for Real Estate

The financial sector is truly global and very much interconnected. Beginning with the U.S.'s housing downturn and credit crunch as the initial "domino", all European countries were subsequently affected to varying degrees. But why was the current recession unlike the Great Depression of the 1930's? The first answer is BRIC--Brazil, Russia, India and China. These countries have seen growth which was not present in the 30's and have subsequently suffered far less. In total, BRIC has produced 1/3 of economic growth worldwide during the current recession. Second, policy response was much greater this time around. We responded by reducing interest rates and enacting policy to support the financial system. An overall economic recovery is good for real estate, but going forward investments must be diversified beyond Europe with an eye to price differentiation between countries in regards to risk.

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