Monday, 17 March 2025
The latest BF.Quartalsbarometer reveals a continued improvement in sentiment among real estate lenders in Germany. For the fifth straight quarter, the sentiment index has climbed, rising by 3.9 points to -9.89 in Q4 2024 from -13.79 in Q3. While the index still falls below the neutral zero mark, this progression highlights a steady recovery from its record low of -20.22 in Q3 2023.
Key Trends Driving the Recovery
1. Revival in New Lending Activity
A notable factor behind the improved sentiment is the growing optimism in the new lending business. According to the survey, 38.9% of respondents reported stable or increasing new lending activity—a 17.7 percentage point jump from Q3. Meanwhile, only 19.4% noted a decline in new lending, a significant drop from 36.3% in the previous quarter.
2. Improved Financing Conditions
The perception of financing conditions has also brightened. The proportion of respondents with a negative outlook fell dramatically from 72.7% in Q3 to 38.9% in Q4. Moreover, a small but notable group (8.3%) expressed a progressive or positive view, marking a return to optimism after several quarters of stagnation.
Industry Perspectives
Francesco Fedele, CEO of BF.direkt AG, highlighted the market’s changing dynamics:
“We’ve seen a clear shift in sentiment since the Expo Real trade fair in October, which has translated into more financing transactions. I expect this positive trend to continue into 2025 as confidence rebuilds.”
However, caution remains. Professor Dr. Steffen Sebastian, chair of real estate financing at the University of Regensburg and scientific advisor to the Quartalsbarometer, emphasized the persistent challenges:
“The index is still below zero, reflecting ongoing difficulties. External factors like the war in Ukraine, Germany’s weak economic growth, and preparations for Basel III regulations pose significant risks. Banks are adjusting margins and building capital buffers in response to these challenges.”
Key Financial Metrics: Margins and Ratios
Margins
Financing margins saw an increase of approximately 10% in Q4. Margins for inventory financing rose by 22.3 basis points to 239.5 basis points, while development financing margins increased by 25 basis points to 337 basis points. These increases reflect banks’ efforts to adjust to evolving regulatory and market conditions.
LTV and LTC Ratios
Loan-to-Value (LTV) and Loan-to-Cost (LTC) ratios also experienced moderate growth. The LTV ratio for inventory financing rose by 2.0 percentage points to 60%, while the LTC ratio for property developments increased by 1.4 percentage points to 68.7%.
“These trends indicate easing strain in the market,” Fedele noted. “However, value adjustments in properties may be influencing these ratios, and this should be closely monitored.”
Challenges Ahead
Despite the positive trajectory, significant uncertainties remain. Banks are preparing for the next phase of Basel III regulations, set to take effect in January 2025, which will impact capital adequacy requirements. Additionally, geopolitical instability and weak economic performance in Germany continue to weigh on lender sentiment.
About the BF.Quartalsbarometer: The BF.Quartalsbarometer, compiled by bulwiengesa AG for BF.direkt AG, offers a detailed analysis of sentiment and business conditions among real estate lenders in Germany. The quarterly survey collects insights from over 110 experts directly responsible for loan approvals across a range of financial institutions. Key factors evaluated include changes in financing terms, new lending performance, risk tolerance, and liquidity costs.
