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Commercial Real Estate: Europe: Difference between revisions
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== Loans Performance == | == Loans Performance == | ||
The best market estimate assumes a total European CRE debt market of €1.5trillion with an annual new debt origination amount of €310bn. <ref name=":2">https://www.bayes.city.ac.uk/__data/assets/pdf_file/0005/725585/Eurpean-CRE-Lending-Report-YE2022.pdf</ref> | |||
{| class="wikitable" | |||
|'''Estimation of EU total CRE debt outstanding (€bn)''' | |||
|'''YE 2022''' | |||
|'''Annual origination'''<ref name=":2" /> | |||
|- | |||
|UK | |||
|280 | |||
|40 | |||
|- | |||
|Germany | |||
|360 | |||
|90 | |||
|- | |||
|France | |||
|150 | |||
|30 | |||
|- | |||
|Spain | |||
|75 | |||
|10 | |||
|- | |||
|Other | |||
|700 | |||
|140 | |||
|- | |||
|'''All Lenders''' | |||
|'''1565''' | |||
|} | |||
=== European Systemic Risks Board Report<ref>https://www.esrb.europa.eu/pub/pdf/reports/esrb.report.vulnerabilitiesEEAcommercialrealestatesector202301~e028a13cd9.en.pdf?94fa2bfacc0cf836fa9f5003bd5a1651</ref> === | |||
==== Importance of CRE markets for financial stability ==== | |||
* Averse developments in CRE markets lead to a tightening of credit conditions, thereby reducing new investment in the economy. | |||
* CRE investments by investment funds can affect financial stability when the funds are subject to redemption risks, and liquidity needs under stressed market conditions lead to fire sales. | |||
* Banks have not sufficiently performed sensitivity analyses on CRE exposures, especially to measure the potential impact of an increase in interest rates. As a result of these weaknesses, the affordability of some borrowers may not be as robust as banks had originally assumed. | |||
* There could be o significant asset value overstatement due to shortcomings in collateral valuation. | |||