The past year has probably been the weakest since 2009 in terms of the volume of investments in real estate, both in the Czech Republic and throughout Central and Eastern Europe (CEE). This conclusion has resulted from the KPMG Property Lending Barometer survey. It has involved representatives of 48 banks from 10 CEE countries.
Still, regional commercial real estate bankers remain mildly optimistic. The number of transactions carried out under pressure was still minimal and there was no significant increase in problem loans, the share of which is still the lowest among Czech and Serbian banks. Czech and Slovak banks also still maintain the lowest interest margins, but have already rejected some loans due to ESG.
Logistics projects became the bankers' most preferred real estate, which narrowly overtook residential buildings years later. They remained the most popular only in Serbia and Bulgaria. In the Czech Republic, office projects finished third in popularity, followed by retail real estate. In other countries, retail projects have conceptually won over offices.
Bank financing of commercial real estate was most affected by the dramatic rise in interest rates last year. The second strongest influence was the negative development of the economy of the country where the bank operates. Other factors such as the pan-European economic situation and the lack of quality real estate projects followed later. Nevertheless, the interviewed bankers see the future of the real estate market and its financing rather optimistically.
More than 60% of the interviewed bankers confirmed an increase in their interest margins compared to the previous year. "However, this growth was very moderate compared to the jump in reference interest rates behind the dramatic growth in interest costs. Banks' interest margins thus remain relatively very stable, mainly thanks to the competitive environment," pointed out Pavel Dolák, Survey Coordinator at KPMG Czech Republic.
More than 80% of bankers interviewed confirmed that their bank has adopted a strategy for ESG criteria in commercial real estate financing. In the case of the Czech Republic, Slovakia, Hungary and Croatia, all interviewees have this strategy. "ESG in the Czech Republic is assessed not only by large banks with foreign owners but also by smaller banks owned by domestic entities. This reflects a broader trend where ESG factors are gradually becoming an integral part of the overall credit environment in the Czech Republic," emphasized Pavel Kliment, Partner at KPMG Czech Republic.
"The past year is expected to be the weakest year since 2009 in terms of the total volume of investments in real estate, both in the Czech Republic and throughout CEE. Indeed, high-interest rates have improved the return on non-real estate investments. We also observe a significant difference between the price perceptions of sellers and buyers. However, the number of transactions carried out under pressure or duress is still minimal. Future development depends mainly on the speed of the expected reduction in interest rates, which will improve the mood of the real estate market," summarized Pavel Kliment.
