Real estate crisis in Germany: Big losses in loan commitments for commercial real estate - that's what the experts say.

Real estate crisis in Germany: Big losses in loan commitments for commercial real estate - that's what the experts say.

According to a report by finanzmarktwelt.de, a study shows that new business from the major real estate banks in Germany has declined massively. In the first half of 2023, the loan commitment volume for commercial real estate fell by 25% compared to the same period last year. This development is primarily due to rising interest rates and falling valuations. Banks are increasingly concentrating on extending existing financing and on crisis-resistant asset classes such as housing and logistics.

This decline in new business is having far-reaching effects on the real estate market. Banks' increasing reluctance to grant loans could lead to a further downturn in the real estate market. The stronger focus on loan extensions instead of new loans gives banks higher income, but also shows the banks' cautious attitude in view of the current situation.

The findings from the study suggest that banks will continue to be cautious in the second half of 2023. Almost all real estate banks analyzed expect a decline in new business compared to the previous year. This forecast could further weaken investor confidence in the real estate market and lead to a further slowdown or even a decline in the real estate market.

The entire industry is likely to be affected, as a decline in new business will also impact the construction industry, the financial sector and other related areas. Current developments in the real estate market require a thorough review of financing strategies and adaptation to changing conditions in order to minimize possible risks.

The increasing reluctance to grant credit could also lead to alternative financing options being increasingly considered in order to cushion the effects of the decline in new business from real estate banks.

It remains to be seen how the situation will develop and whether real estate banks will be able to adapt to the new circumstances. However, the current study shows that changes and adaptations in the industry are inevitable to deal with the current challenges.