When interest rates rise, there is a risk of real estate companies filing for insolvency.
The global financial crisis of 2008 began with a real estate and housing price bubble in the United States.
The real estate sector has the highest share of zombies, 13 years later, he told CNBC on Wednesday. zombie companies are those that are at least 10 years old and have persistent problems meeting their interest payments.
According to a report, rising interest rates or a bad economic environment can put companies at risk of insolvency.
Wall Street is expecting the U.S. Federal Reserve to raise interest rates multiple times this year.
When asked if the real estate market could face a crisis when interest rates rise, he said it was a possibility.
The real estate sector will be hit even harder by the economic results of the Pandemic.
The number of zombies will increase given that inflation is high and interest rates are projected to rise, he said.
The number of zombie firms could increase by 40% if interest rates double.
The real estate sector had the highest absolute number of zombies and the highest share of zombies, according to the report.
The report said that the real estate industry is the mostombified.
In the real estate industry, 7.4% of companies were classified as zombies. The percentage of zombie real estate conglomerates and development firms is higher.
He predicted that the numbers would rise in 2021.
The real estate sector is going to be hit even harder by the economic results of the Pandemic, according to Kuhlwein.
The automotive sector is likely to see an increase in zombie companies in 2021, given the supply chain disruptions that plagued auto firms.
According to the report, the number of zombie firms nearly tripled from around 600 in 2010 to nearly 1,800 in 2020.
If you look at the development over the past 10 years, I would say that is an issue.
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