Oesterreichische Nationalbank: Advertisements for an increase in loan defaults in the real estate sector

Oesterreichische Nationalbank: Advertisements for an increase in loan defaults in the real estate sector

According to a report by www.kleinezeitung.at the Oesterreichische Nationalbank (OeNB) sees signs of an increase in loan defaults in the real estate sector. In the commercial real estate sector, the rate of non-performing loans (NPL) rose again to 3.1 percent in the first half of the year. After years of falling rates, there are now slight increases again in the area of ​​private residential lending.

This increase in loan defaults is due to the significant rise in interest rates since last year, which has had a positive impact on bank balance sheets, but has a negative, delayed effect on banks and borrowers. Higher refinancing costs and increased interest rates are putting pressure on companies and individuals, leading to an increase in loan defaults.

For banks, this means planning particularly forward-looking and conservatively when valuing real estate and creating risk provisions. Interest rate expectations should also be kept an eye on, as the European Central Bank (ECB) is sending mixed signals regarding a rate cut. In uncertain times, it is important to be very careful with expectations.

The impact of this development could lead to weaker credit growth and higher defaults in the real estate sector. In addition, the decline in loan growth suggests that the Credit Institutions Real Estate Financing Measures Regulation (KIM-VO) is not having the desired effect, as this decline is interest-driven and not caused by the regulation. This could increase calls for easing restrictions in the industry.