Having returned trough scores six times in a row, the BF.Quartalsbarometer saw its first modest gain this time around, ascending from -19.44 points in Q1 2023 to -17.29 points now. While key parameters of the sentiment index for real estate lenders did not deteriorate any further, survey respondents reported occasionally increased loan volumes. Although 38 percent of the average individual loans granted still amount to less than ten million euros (Q1: almost 40 percent), it was the first time after six trough quarters that a figure of more than 100 million euros was reported. Loans volumes between 50 and 100 million euros made up nearly 17 percent of the total (Q1: 12.5 percent).
The assessment of the current situation on the financing market has barely changed since the first quarter. Three out of four financing experts polled rate the current situation on the financing market as more restrictive, while one in four considered it unchanged. Similarly, the trend in new lendings flatlined for the vast majority of survey respondents. Stagnation was also diagnosed in regard to additional liquidity costs.
Francesco Fedele, the CEO of BF.direkt AG, commented: āOur assessment is that sentiment among real estate lenders appears to be finding a stable basis. The question is how long the situation will last.ā That said, the macro-economic parameters also point to stability on a low level. Professor Dr. Steffen Sebastian, tenured chair of real estate financing at the International Real Estate Business School (IREBS) of the University of Regensburg, and scientific advisor of the BF.Quartalsbarometer, said: āWe are currently seeing a lateral movement of lending rates emerge. In spite of divergent expectations, economists agree on one thing: The inflation rate will exceed the two-percent target set by the ECB in the medium term. This means that interest rates should not be expected to decline any time soon.ā
Margins continued their steep upward growth, reaching their highest level since the survey was started in Q4 2012. The average rate in portfolio financing grew from 235.1 basis points (bps) the previous quarter to now 245.1 bps. The average margin for property developments pushed up from 337.1 to 342.3 bps. The loan-to-cost (LTC) and loan-to-values (LTV) ratios remained stable at 65.3 percent (+0.3 percentage points) and 69.3 percent (+0.1 percentage points), respectively.
Replies in answer to the question which property types are currently eligible for financing reveal that clear trends in regard to property developments have emerged over the past two years. While survey respondents across the board still confirmed their willingness to approve loans to property asset holders for residential developments in Q2 2021, only 63.6 percent said the same in the current survey. The willingness to lend to contractors and to developers splitting houses into freehold flats sank from 70.4 to 38.6 percent. The share of financial institutes prepared to finance office developments dropped from 81.5 to 56.8 percent. The willingness to finance also declined for other use classes such as logistics, retail, social real estate, micro-apartments, and multi-storey car parks. Hotel developments represented the only class registering a significant increase, as their share of responses rose from 7.4 to 22.7 percent.
āThese figures reflect the crisis of the property development market. Especially, the declining willingness to finance residential projects is cause for alarm. It arguably indicates that the housing shortage will intensify. This is where the full impact of misguided housing policy developments becomes apparent,ā commented Manuel Kƶppel, CFO of BF.direkt AG.
In answer to this editionās topical question as to the likely effects of ESG on the eligibility of housing stock for financing, survey respondents said they expect the compliance with sustainability criteria to have a significant influence on the availability of debt capital. Some experts predict that, going forward, it will get significantly harder to obtain financing for projects that fail to take ESG criteria into account. Even now, scrutinising the energetic criteria in the case of existing apartments plays a part in loan decisions.
