The sharp fall in five-year swaps has depressed forecast returns for UK senior debt, from 3.7 to 3.3 percent.
Amid continuing low interest rates, ease of availability and low return requirements, senior loans in Germany are tipped to “increase in attractiveness in the future” according to the EY Real Estate Capital Radar Germany 2016 report.
With a liquid and fiercely competitive market for real estate, panellists at Real Estate Capital’s inaugural Germany 2015 Forum, held at Kempinski Gravenbruch, Frankfurt, last month, discussed whether lenders could keep chasing margins down and where to find value.
Germany’s real estate market is flush with cheap debt. “There is an oversupply of bank finance and that is a challenge for an international bank,” said Jürgen Helm, HSBC’s head of German real estate.
Deutsche Bank director Jörg Oestreich concurred: “Everybody is chasing exactly the same assets and that is why our lending margins have become so low.”
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