FinLoop’s Q3 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 Q3 2022
- Debt affordability has been further declining across European real estate markets with rising interest rates. 10yr BBB credit spread have increased another 80bps in Q3 2022
- Loans on highly priced properties with 60% LTV are now stretched to cover interest payments when refinanced today, borrowers in Germany, Sweden, and the Netherlands are still slightly better off than in other markets
- The listed real estate market is leading the market indicating the anticipated decline in property values, EPRA showing a Q3 2022 performance of -16% (previous -24%) leading to an expected decline in underlying property values of 30 – 40%.
- Q3 2022 showed €1.3bn further deal volume across FinLoop platform, 33% of financing requests were for residential loans, 17% office.
- 17% of FinLoop listed transaction were seeking debt for transitioning assets, refurbishment and asset improvements
- Most active lenders were alternative lenders, while banks were showing keen interest in residential transaction and stabilised assets with cash flows.