Real estate crisis escalates: banks expect a wave of insolvencies in Germany!

Real estate crisis escalates: banks expect a wave of insolvencies in Germany!

The real estate market in Germany is currently facing considerable challenges. A survey by EY-Parthenon, carried out in the second quarter of 2025 among 36 credit institutions, shows an alarming assessment among financiers. According to the results, 75% of the institutions involved rate the situation on the German real estate market as negative. In the coming year in particular, 72% of credit institutions expect an increase in bankruptcies, while only 8% predict a decrease. This latest development could have serious consequences for the entire industry.

The survey found that the majority of financiers predict a difficult future for office and retail properties. Almost 70% of credit institutions expect prices for office properties to fall. Last year, 50% of financiers saw prices stable. In addition, around two thirds estimate the price development in retail to be falling. The refinancing risk is particularly critical: the institutes classify this as (very) high for office and retail properties.

Risks for banks and the financial system

Real estate financing not only has a direct impact on the real estate market itself, but is also of great economic importance. According to the Bundesbank Real estate loans make up around 70% of all loans to companies and households in Germany. Therefore, a decline in property prices and an increase in loan defaults could threaten the stability of the entire financial system.

Against this background, the Bundesbank warned of excessive risks that could arise from excessive prices and laxer lending standards. While there are currently no signs of excessive risk, there is a trend towards lower loan collateral and price increases in urban areas. The Corona pandemic in particular has shown how vulnerable commercial real estate financing is, which was underlined by massive declines in retail sales in April 2020.

Current challenges and outlook

For many banks, real estate loans are a mainstay of their business model. While there has been strong credit growth and price increases in recent years, banking regulators are now seeing significant reluctance to engage in new transactions and tightening of lending criteria. Over 90% of credit institutions state that lending is more restrictive than before the crisis, with 42% even tightening the criteria further in the last six months. The biggest challenge is seen by 25% of respondents in financing costs and refinancing, which contributes greatly to growing uncertainty.

The prospects for a recovery are muted: 50% of financiers only expect positive developments in three years, while 85% even think this will happen in five years at the earliest. Given this reality, the situation in the real estate market remains tense and credit institutions and regulators will need to continue to be vigilant.