Friday, 29 June 2018

German Property Finance - LTVs are Decreasing "Only" Due to Price Increase


A recent finance study by IRE BS Immobilienakademie states that the Loan To VAlue ration in German property financing has decreased from 65% to 61% since 2016 but "only" because of price increases. In other words, banks  don't believe that current prices represent the value of the properties they are financing so they are cutting back on their exposure.

Why is this supposed to be good news? It follows the calls form the Deutsche Bundesbank about a Property Bubble even though several demand based indicators don't support the view. Maybe if they keep it up for another 5 to 10 years, one day, they will be right.

Press release in German.

Purchase the report in German.


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