Real estate, European banks risk 14.5 billion in losses. Here because
A real estate bubble is it about to explode in Europe? According to an analysis published by Sole 24 Ore, market conditions in general are clearly improving, but to get out of the “real estate debt” in which the EU finds itself, the drop in rates may not be enough. The proof comes from the latest analysis of Aew, one of the main ones asset and real estate investment managers with over 82 billion Aum, which it predicts 42.5 billion euros in defaults on real estate loans, resulting in losses of 14.5 billion of euros in the next three years for credit institutions on commercial real estate financing. The economic newspaper explains in fact that “the sudden drop in inflation and, on the horizon, a drop in rates – therefore of mortgages and financing costs of commercial real estate in the Eurozone – they should reactivate the dynamism in the markets as early as 2024 but with greater acceleration in 2025; however many still face problems with the refinancing of loans pre-existing conditions for the reduction of the values of the guarantees”.
“Based on ours three-step methodology – underlined Hans Vrensen, head of research & strategy Europe at Aew – we estimate that of the 572 billion euros of preal estate repayments European contracts in the non-residential sectors (the so-called commercial) and originated between 2018 and 2021, 7.5% (equal to 42.5 billion euros) will go into default, while 2.5% (equal to 14, 5 billion) will represent the losses associated non-recoverable. These are losses in line with historical losses on European CMBS (Commercial Mortgage Backed Securities) loans following the global financial crisis.”
But who will suffer the most? According to the analysis of Aew the most affected country will be there Germany: Berlin could reach losses of 4.5% (around 7 billion euros, including 2 billion euros in German retail) of the 157 billion euros in secured loans originated between 2018 and 2021.
Overall, the European average stands at 2.5%, while the countries of South Europe, including Italy, “being less exposed, it should have a loss threshold of less than 2 percent”. The German banksremember the Sun “they have been under observation for some time, because they have the greater number of commercial real estate loans in the European Union, along with their French counterparts, but have classified a relatively small portion of such loans as non-performing (however increasing).”
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