Financial experts predict lower volumes of German distressed real estate loans
The number of non-performing real estate loans that will come to the German market in the near future, is expected to be substantially lower than last year.
The trend of parameters such as gearing ratio, debt maturities, and financing volumes suggest that banks do currently prefer to extend their loans than to dispose of them. At the same time, fewer banks are expanding their new business in the German market.
This is the main outcome of the “Survey on the State of Real Estate Financing and on the Distressed Real Estate Debt Situation in Germany” conducted by the research centre Distressed Real Estate Debt, which is jointly operated by CORESTATE Capital AG and the Real Estate Management Institute (REMI) of the EBS University for Economics and Law.
“The present opportune interest rate is certainly one reason for the low number of distressed real estate portfolios currently on the market. Banks are provided with an abundance of capital since the European Central Bank announced its bond buying program. Therefore, the pressure on banks to sell their non-performing loans has decreased,” says Ralph Winter, founder of CORESTATE Capital AG. "Nonetheless, distressed real estate assets will continue to be put on the market and their state can only be improved by a professional approach to real estate management, allowing for a stabilisation and repositioning of such portfolios."
The research focuses on assessing the current financing sentiment in the real estate market from the banks’ perspective. This survey follows last year’s research undertaken by the CORESTATE Research Unit for Distressed Real Estate Debt.
“This year's survey shows how significantly the sentiment in the market can change within one year,” says Professor Dr Nico B Rottke, Founder and Head of the Real Estate Management Institute of the EBS University for Economics and Law. “This underpins our plan to repeat the poll on an annual basis. This way we are able to analyse the parameters of the market for distressed real estate assets and assess the significance of non-performing loans."
Almost 60 leading personalities, such as CEOs, CFOs, and Managing Directors, from 32 commercial real estate financing institutions received the questionnaire. The total assets of the banks participating in the poll add up to approximately EUR2,563bn representing 72% of all assets from all CRE financiers based in Germany.
“Our survey shows that the financing landscape is still in a structural change,” says Rottke. "Banks continue to implement regulatory measures and impose higher capital requirements or scale back their activities completely."
The research centre intends to use these findings as a basis for further scientific studies. It is also planned to repeat the poll annually in order to make industry developments and trends transparent and accessible to all stakeholders.