During the first quarter of 2018, real estate lending margins fell in selected European markets, including Ireland, Portugal and the Netherlands according to CBRE’s latest European Debt Map.
Overall, however, most markets have seen minimal movement in senior lending terms on prime capital city office investment loans, meaning there has been little change in the relative risk/reward of the different markets compared with Q4 2017.
• Of the larger markets, only France experienced a change, with margins on 60 percent senior lending inching in to 1.05 percent from 1.10 percent a quarter earlier. Germany, Italy and the UK were unchanged.
• Margin compression was most prevalent in the smaller Western European markets, where margins in five countries out of seven declined over the first quarter. The biggest fall of 50 basis points was in Ireland, from 2.25 percent to 1.75 percent; Portugal and Switzerland dropped 20bps and margins dipped by 5bps in Belgium. The fall from a midpoint of 1.38 percent to 1.05 percent in Netherlands was accompanied by a decline in LTV from 65 percent to 62.5 percent.
• In Scandinavia, Finland’s margins fell from 1.30 percent to 1.05 percent, while LTVs rose to 62.5 percent, from 60 percent. In Norway, a rise in senior LTVs from 60 percent to 65 percent was accompanied by a hike in margins from 1.70 percent to 2.15 percent. Denmark and Sweden saw no change in lending terms.
• Margins in Poland fell for 70 percent senior lending, from a midpoint of 2.50 percent in Q4 2017 to one of 1.80 percent in Q1 2018. Margins in other CEE markets were stable.