COVID-19 economic turbulence has pushed global property prices down 6% so far this year, but things could get worse, according to a report from Adam Slater, lead economist for Oxford Economics.

Slater is concerned that the COVID-driven slump has the potential to trigger a longer-term disruption in the financial system. While baseline CRE loan losses are lower than the losses incurred during the global financial crisis, he says that losses are comparable in downside scenarios. 

But COVID could put unique strains on the system not seen during the global financial crisis. It could lead to lengthier downturns in some sectors that could result in loan losses exceeding the level seen during the Great Depression. Commercial property bonds issued between 1922 and 1931 showed default rates of up to 70% (for later vintages) and an average loss rate of some 25% of original balances, according to research from Oxford Economics, Haver Analytics, PennMutual, Moodys, Trepp and Wiggers & Ashcraft.