Refinancing requests set to rise in German resi market this year

The first half of 2022 saw strong demand for short-term debt to finance acquisitions while the second half was dominated by requirements for refinancing, in the experience of John Krant, Managing Partner, Salux Real Estate GmbH

Trends this year are hard to predict: “I can tell you what we’re not going to see, which is a strong pickup in market activity and lending activity in the next six months. We’re pretty sure that’s not going to happen, as much as I would love to see it. We think it’s going to be subdued for quite a while.”

Salux is a senior debt bridge loan provider focused on residential property, exclusively in Germany. The company lends on terms from three to 12 months while other banks or debt funds have minimum durations of 12 months to two years.

“We do short term, so it’s basically used for bridge loan financing, for acquisition financing or refinancing, that can be paid back within 12 months,” Krant told Real Asset Insight’s Richard Betts.

How market trends progress will depend on how the the causes of the current insecurity develop over the next six months, Krant said.

“We have so many different ingredients for this insecurity and for the subdued transaction activity that it’s hard to predict when they will disappear and when market activity will pick up again,” he added.

One thing that he does expect is an increase in demand for refinancing requests.

“Most lenders are trying to collect their money and are trying to be more conservative, so absolutely, refinancing requests will go up significantly.”

“The question is, are they still bankable?”

He said there is a huge distinction to be made between project developments – about which he is somewhat pessimistic about many projects’ bankability – and real assets that need to be refinanced.

Please click on the video above to watch the full interview or listen to the podcast below.