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The most preferred real estate asset class for financing is office segment

2019 Property Lending Barometer

The overall volume of real estate transactions in Slovakia has reached EUR 237 million in H1 2019 what represents decrease of 44 % compared to H1 2018. The average loan sizes vary from EUR 6 to EUR 9 million, while the preferred range is higher, between EUR 11 and EUR 20 million. Office is the most preferred asset class for financing, followed by residential and industrial/ logistics. These are the findings of KPMG’s 2019 Property Lending Barometer, a well-established white paper which assesses banks’ lending sentiments toward the real estate markets across Europe.

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Property Lending Barometer 2019

According to this survey, growth trend in lending activity across Europe is expected to continue in 2019, mainly due to competitive pressure contributing to easier credit terms and conditions. The European loan portfolio market has experienced closed deals amounting to around EUR 50 billion in the first half of 2019. This year, European deal volumes are forecast to exceed EUR 100 billion.

“The six major countries in CEE – the Czech Republic, Poland, Hungary, Romania, Slovakia and Bulgaria - saw investments totaling EUR 5.5 billion for the first half of this year,” said Michal Maxim, Senior Manager, Financial Services, KPMG in Slovakia. Poland accounts for more than half of that total, with the Czech Republic also making a significant contribution.

Transaction volume in H1/2019 in Slovakia reached 237 mil. EUR what represents decrease of 44% compared to H1/2018. Among key 2019 transactions belongs disposal of Twin City Tower in Bratislava or Business Centre Tesla 2 in Košice.

According to KPMG study the proportion of fully compliant loans is particularly high in Finland and the Czech Republic (with the current rate of fully compliant loans exceeding 99%). Slovakia ranks second among CEE countries with 96% of fully compliant loans.

Data from the first half of 2019 showed that the office sector is still the most significant asset class (at 44%), followed by residential (24%), retail (12%), industrial (11%) and hotel (9%). The retail sector suffered a dramatic decline in investment, by 51%, compared to that for the same period of 2018. In Slovakia, office is the most preferred asset class, followed by residential and industrial/ logistics. Financing income-generating projects is more attractive to Slovakian banks, while they are less open to supporting new developments.

Banks were also asked how financing of other industries compared in attractiveness to real estate lending. Overall, food & beverage and manufacturing industries had the highest preference, followed by information technologies, healthcare, energy & utilities and telecommunication. The most attractive sectors for financing according to representatives of Slovak banks are automotive and manufacturing.

The most significant factor for banks in Europe affecting their real estate portfolios is still the macroeconomic conditions in the local market. In the majority of the countries the most important criteria for obtaining financing for real estate projects are a strong business model and the quality of the asset. Overall banks view non-local commercial banks as their key competitors in most of these markets, especially in Central and Eastern Europe.

About the survey

2019 Property Lending Barometer is the 10th edition of this survey conducted by KPMG's Real Estate practice. This comprehensive publication sizes up the prospects for bank financing in the real estate sector in 15 countries across Europe including Slovakia, with representatives from nearly 70 banks participating. The 2019 Barometer includes input from close to 70 banks, collected primarily via in-depth interviews and online questionnaires.

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