Slow-Motion Property Crash in Germany
A Slow-Motion Property Crash in Germany Is a Bigger Threat to Banks Than US CRE
A long-term view of property values has shielded banks so far
“Also, it’s not like they’re holding worthless paper like back in 2008, there are buildings behind these loans.”
The value of those properties, however, remains the subject of much debate as the gap widens between the prices buyers are willing to pay and those sellers need so they can repay their loans.
German property values are particularly vulnerable to higher borrowing costs because capitalization rates — or the potential return on a real estate investment — were pushed lower there than in other markets during the cheap money era.
That reflected in part the fact that yields on German government bonds, a benchmark for investors, were negative at the time.
Bloomberg 27 februari 2024
Deutsche Pfandbriefbank Too Small to Survive, Too Big to Fail
https://englundmacro.blogspot.com/2024/02/deutsche-pfandbriefbank-too-small-to.html
ECB Warns Banks of Consequences for Poor Property Risk Management
https://englundmacro.blogspot.com/2024/02/ecb-warns-banks-of-consequences-for.html
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