Mood remains upbeat among German property finance providers

The latest quarterly barometer from Berlin-based Flatow Advisory Partners, which measures the climate in Germany for real estate finance investing, reflects a buoyant mood among property financiers as new lending business opens up.

In its latest reading for the fourth quarter of 2014, Flatow's FAP Barometer returned a stable positive score of +2.33 index points (slightly down on the previous quarter's +2.48 points). Sentiment among lenders on the German commercial real estate financing market remains upbeat, is the clear message. Effectively, nearly 70% believe that the parameters for commercial real estate financing are more progressive than they were the previous quarter. Overall the financing market has been rated as steadily more progressive (i.e. "greater willingness to finance") by the interviewed experts since 2012, the year the FAP Barometer was launched.

According to company founder Curth-C Flatow, “Banks are able to access money cheaply, and they are happy to put it into real tangible investments. Property remains a segment in high demand.”

The barometer shows that new business remains steady at around 49%. For existing properties, loan-to-value ranges from 50%-100% in fourth quarter, with the weighted average at around 72% across all financing and property types. Margins are 65bps-600bps at a 176bp average, up from 167bp in 3Q13. For project developments, FAP registered LTVs of 50%-90% for a 76% average, up from 73%, and margins of 224bps, up from 205bps.

The bulk of lending volume (85%) is made up of facilities of up to €50m, the survey found, even though the number of loans in the €50m-€100m bracket fell to 9% from 20% in 3Q14. Niche segments such as wellness or entertainment properties or parking garages are becoming more readily financeable, while residential, office or mall financing showed a small contraction. Among project development, hotels and micro apartments were notably prominent.

Respondents were also asked for their views on the direction of residential property. About 56% of financiers said they expect further rising rents, but 44% believe the peak has been already been reached. The picture is clearer for purchase prices, with 61% saying the peak has come and gone, while 39% believe the price rises have further to go.