FinLoop's Q2 2022 European debt barometer shows further sharp decline in debt affordability.
The new European debt liquidity barometer for real estate debt markets by FinLoop is based on relative debt market performance for 7 selected European markets. It tries to assess the credit environment and debt availability for real estate investors in each market based on economic, financial and property market indicators.
Key findings Q2 2022
- Without significant movements of property yields, and the continued increase in lending rates, debt affordability has been the main factor of declining debt market conditions for borrowers across European markets.
- Overall economic and lending conditions in the largest economies France and Germany have declined rapidly between Q1 2022 and Q2 2022.
- For the most prime properties leverage cuts off at 50% LTV to maintain prudent ICR covenant levels, especially logistics is still trading at high income multipliers.
- The EUR BBB IBOXX bond spread has increased by another 171bps over the 3 months in Q2 2022, prompting lenders to increase their real estate debt margins by 50 – 100bps.
- FinLoop recorded a clear reduction of lenders willing to look at hotels and student housing in the UK as well as in Germany between Q1 to Q2 2022. Generally, lender appetite for real estate debt as declined over Q2 2022.