Financing margins still tightening, development more profitable

The latest reading of the quarterly BF.direkt financing barometer for German real estate indicates little or no measurable 'Brexit' impact on German market sentiment, with the index down only slightly to 0.52 points from the previous quarter's +1-04. On the barometer's gauge this gives a reading of "balanced market", and as such is a continuation of the sidewise trend being shown by the indicators since Q3/2015, a full year ago.

The reading does show that financing company margins on portfolio investments are still declining, currently amounting to about 130 basis points. In contrast, margins in the field of project development have increased slightly, and are currently at about 200 basis points.

According to Francesco Fedele, CEO of the Stuttgart-headquartered BF.direkt AG, “The generally expected positive impact of the “Brexit” is not discernible in the current BF.Quartalsbarometer. Instead of falling into euphoria due to assumed positive location-based effects, the mood of the experts is characterised by realism or even skepticism. We don’t perceive the rising margins in project development as a trend reversal but as a reaction to the fact that in the current market environment, many financing transactions are being replaced by forward deals, with the rising margins thus being collected across shorter periods of time.”

The quarterly index is compiled by independent market researcher BulwienGesa from 130 providers of German property finance.