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Real estate
The suitability of a project for a green loan is determined using Deutsche Hypo’s in-house scoring model. The criteria include: energy consumption, certification, proximity to public transport, the materials used and the extent of surface sealing.
Germany is already in the grips of a real estate bubble, according to more than half of the 320 real estate experts surveyed for Berlin Hyp’s Trendbarometer this month.
The general consensus is: ‘We won’t recognise the bubble anyway until it bursts, so a lot can still happen,’ according to the survey. Just 45% of those surveyed do not believe that we need to fear a bubble.
There is also a slight disconnect between what those in the industry assume lenders are doing and what actually comes to pass. For example, 76% of respondents assume that banks are taking higher risks in order to safeguard adequate margins. Yet in the current late phase of the real estate boom, many real estate lenders are actually acting cautiously and are providing less, albeit very selective, lending, which has resulted in a shortfall in real estate financing. In addition, the decline in prepayments means that new lending can be recognized more quickly on the balance sheet and Basel IV is gradually requiring more equity needed to back operational risk.
‘Due to the high degree of market maturity, we are taking a more selective approach to new lending and are very risk-conscious,’ Nicole Hanke, head of marketing at Berlin Hyp, told REFIRE. ‘Basel IV affects the lending market in an important way. The regulatory costs have to be earned and the banks have to meet the equity requirements.’
Nonetheless, new lending is expected to remain stable, according to the survey respondents, of whom 69% said they expect new lending to remain stable or increase over the next 12 months. Just 28% expect new lending to decline. The average credit volume is expected to be between €10 and €50m. An additional 26% of people surveyed expect to see lot sizes of between €50m and €100m, with 12% predicting average volumes in excess of €100m. Margins are also expected to remain stable or even rise over the next 12 months, according to 61% of respondents. Another 37% expect margins to fall.
‘According to our survey, resi is the most interesting asset class (followed by offices and logistics),’ Hanke said. ‘It’s very stable and lower risk relative to other asset classes. There’s also very strong demand for housing in Germany. The market will become more risky because we’re probably almost at the end of the cycle.’ (ssk)
