Real estate is not out of the woods but the banks are ready

This year will be little different to 2023 for the financing markets according to Markus Beran, head of origination, international investors, at German real estate bank Berlin Hyp.

“We see limited transactions in the market. The requests are there, but not as many. The market has dried up because of the steep increase of interest rates.” Price finding and reduced inflation are the main needs in order to determine a new level for the market, he explained to Real Asset Insight’s Richard Betts.

“We are still open for business,” Beran added, but reserves have to be allocated for the affect of revaluations and to maintain capital ratios.

Early ECB warnings of a potential bubble due to the low interest rate environment meant that underwriting had been carefully undertaken for some time and the banking sector was prepared for 2024, avoiding a financial crisis.

Furthermore, there are few loans expiring and requiring refinancing this year because the last decade saw many loans taken out for 10 years which has extended the expiry schedule.

“It’s lower than in other years where you had an average of five years long term, so the expiring loans are less in the next year than usual,” Beran said.

Regulatory measures taken following the GFC have also helped because although some are “over-the-top”, capital reserves and the banking sector are very healthy.

Meanwhile, ESG is less of a talking point because it is now integral. “It’s a normal part of assessment of risk. Every investor who buys a building says ‘how old is this, what do I need to do ?’ and that will determine the price.”