German lenders bullish on lending climate

German lenders have become more bullish about their local market, according to the latest BF. Quarterly Barometer published this week (25 April).

Around one third of the 120 lenders surveyed consider the market to be more progressive than in the previous quarter, resulting in a slight uptick in the BF.Quarterly Barometer from 0.11 to 0.49. (The higher the score, the more widely available credit is to the real estate industry.)

In a sign that lenders appear to have learned their lesson from the last financial crisis, risk awareness is also on the up. Minimizing risk is up 1%, whereas maximizing income and returns has fallen by 2.2%, according to the survey.

‘The increased risk awareness is also reflected in lending decisions,’ said Manuel Köppel, CFO of BF.direkt. ‘This is demonstrated by the question about priorities in new business. The new business department plays a significant role in only 4.5% of lending decisions. In contrast, the risk department gets its way on a quarter of lending decisions (+2.1%),’ he added.

In a further sign that risk is centre stage, 60% of respondents said that financing was not provided either because the project risks were deemed too high, the borrower had a poor track record or the borrower’s equity share was too low.

This sentiment was also echoed in the Verbands Deutscher Pfandbriefbanken‘s (VdP) latest report.

‘Even if there are some pockets of the market that are overheated, from a credit economic perspective, we don’t need to worry about any distortions,’ said Dr. Louis Hagen, president of the VdP and chairman of the board at Münchener Hypothekenbank. ‘Neither lenders nor other financial institutions are showing any sign of systematic increased risk-taking.’

While 96% of those surveyed by BF.direkt continue to finance office and residential properties, more lenders are starting to eye niche opportunities. In the second quarter of 2017, 52% of respondents said they would finance micro apartments and student housing, compared to 46% in the previous quarter. (ssk)