The recent rally in real estate prices – particularly in the UK – has disguised the fact that these assets still present a big problem for many bank balance sheets. According to CBRE, UK commercial capital values jumped more than 10% in the final quarter of 2009, and in January JPMorgan had a capital growth estimate of 15% for the 12 months to June 2010 and a first-quarter estimate of 5% growth.
But because of the savage mark-to-market losses that many real estate portfolios have sustained, many banks have moved their real estate loans from the trading...
