Survey finds more optimism among German financiers

Sentiment among German property financiers has risen significantly in the third quarter according to a sentiment survey commissioned by property finance company BF.direkt.

While The coronavirus crisis and its consequences had caused significant deterioration in all key parameters, the BF.Quarterly Barometer, which is prepared by Bulwiengesa on behalf of BF.direkt, now indicates a strong recovery in the third quarter of 2020.

While 60% of those surveyed said that the state of the financing market is more restrictive, this is down from 80% in the preceding quarter.

Perceptions of the climate for new business development have also improved. Although about 33% of institutions do expect a decline in new business this too is down, from 58% in the previous quarter, while almost half (44%) expect conditions to remain unchanged.

A third of respondents said they expect refinancing premiums to drop, while only 18.5% assume that they will rise down from 83% in the previous quarter. Almost half (48%) of those surveyed expect liquidity costs to remain unchanged.

Risk minimisation is current focus

“Institutions are currently focusing on risk minimisation rather than new customer acquisition,” said Professor Steffen Sebastian, chair of real estate finance at IREBS, University of Regensburg, and scientific adviser to the BF.Quarterly Barometer.

“However, the fact that some market players are cutting back on lending does not mean a shortage on the property finance market. As Germany is overbanked anyway, this is more likely to indicate a return to a healthy normality on the commercial property finance market,” Sebastian added.

BF.direkt’s CFO Manuel Köppel said that last quarter’s extreme movement of the barometer was a snapshot of a single moment at the peak of the shutdown in Germany. “The significant improvement in the quarterly barometer does not come as a surprise as ongoing business is currently doing much better than the general mood would suggest,” Köppel said.

BF.direkt’s CFO Manuel Köppel.

“The restraint being shown by many financing providers also means opportunities. As no-one is able to finance everything anymore, this will mean good times for property finance brokers once again,” he added.

BF.direkt also reports that loan-to-value ratios have risen slightly again. The average loan-to-value on the financing of existing properties climbed to 67.4%, up from 65.6% in the preceding quarter, and the loan-to-cost on the financing of project developments to 73.1% (Q2 2020: 71.1%). Margins remained largely stable, the firm states.