Italy witnessed over €25 bn of non-performing loan (NPL) transactions in 2016, a substantial rise on the €5.3 bn completed in 2015 and almost double the volume seen in Ireland at €12.8 bn, according to new research from CBRE.
Some problem debt still remains in the aftermath of the global financial crisis (GFC) but several European countries, including the UK, are now at the end of their programme of deleveraging NPLs, the report said.
The debt legacy from the GFC continues to get smaller by the year, according to CBRE. Just 9% of outstanding debt now dates back to 2007 or earlier, compared with 13% at the end of 2015 and 18% at the end of 2014.
According to the report, deleveraging and new issuance were broadly in equilibrium in 2016, as the total value of European real estate investment debt dipped slightly over the course of the year, from €1.14 tln at the end of 2015 to €1.06 tln at the end of 2016.
Less new debt
Based on total investment volumes of €255 bn in 2016, CBRE estimates that €116 bn of debt was secured against these purchases – a little below the €125 bn of new debt issued in 2015 but very much ahead of the €68 bn seen in 2013.
On the whole, debt terms were stable over the course of the year for senior debt on good quality property; only the UK saw a modest rise in margins in the aftermath of the Brexit referendum. For secondary property, or higher LTV lending, there was however more evidence of a general increase in margins.
Paul Lewis, head of loan advisory at CBRE, commented: 'Loan portfolio trades by banks represent a key component of Europe’s economic rehabilitation. Whilst progress has been slow in some jurisdictions, we now expect a significant uptick, given both regulatory pressures and deep buyer demand for the right product, particularly in Southern Europe. This will be a positive step for liquidity in some segments of the real estate markets.'
