Lower distressed loan volumes expected in Germany

The number of non-performing real estate loans that will come to the German market in the near future will be substantially lower than previously expected, according to a new survey.

Indicators such as gearing ratio, debt maturities and financing volumes suggest that banks currently prefer to extend their loans rather than dispose of them, the survey found. At the same time, fewer banks are expanding their new business in the German market.

These are the key conclusions of a survey on the state of real estate financing and the distressed real estate debt situation in Germany conducted by the Distressed Real Estate Debt research centre - a joint initiative of Swiss real estate company Corestate Capital and the Real Estate Management Institute of the EBS University for Economics and Law (EBS-REMI).

The current favourable level of interest rates is a major reason for the low number of distressed real estate portfolios on the market, according to Corestate Capital founder Ralph Winter. 'Banks are provided with an abundance of capital since the European Central Bank announced its bond buying program. Therefore, the pressure on banks to sell their non-performing loans has decreased. Nonetheless, distressed real estate assets will continue to be put on the market and their state can only be improved by a professional approach to real estate management, allowing for a stabilisation and repositioning of such portfolios.'

'This year's survey shows how significantly the sentiment in the market can change within a year,' noted professor Nico Rottke, founder and head of EBS-REM. 'This underpins our plan to repeat the poll on an annual basis. This way we are able to analyse the parameters of the market for distressed real estate assets and assess the significance of non-performing loans.'

He added that the survey shows that the financing landscape is still undergoing a structural change. 'Banks continue to implement regulatory measures and impose higher capital requirements or scale back their activities completely.'

The questionnaire was sent to almost 60 leading industry experts including CEOs, CFOs and managing directors from 32 commercial real estate financing institutions. The total assets of the banks participating in the poll add up to approximately €2.5 trn, or 72% of assets held by all commercial real estate financiers based in Germany.

Corestate Capital is a specialist real estate investor based in Zug/Switzerland, with partner offices in Frankfurt, Essen, London, Singapore and Luxembourg. The business has invested more than € 2.5bn in the real estate market both through direct and indirect transactions. The Real Estate Management Institute of the EBS University for economics and law (EBS-REMI) provides real estate-related professional training and research