European banks grant more loans to the property sector

When Spanish Bankia SA received rescue aid in 2012, it was forbidden to grant such loans to the property sector that caused its problems. This ban expired on January 1st and, like other Spanish lenders, Bankia threatened to re-finance real estate projects.
"It's nice to be back in the sector. In terms of growth, the cycle is still upward", said Alberto Manrique, head of real-estate development finance at Bankia, Spain's fourth largest bank by market capitalization.
Not only in Spain, but also everywhere in Europe, the real estate finance is back in the game. With the expansion of the economy, the balance of creditors is also improving. That is why many banks increase the volume of loans to the sector and compete aggressively on interest rates.
BNP Paribas SA, for example, expanded its portfolio of business loans with a two-digit figure in percentage terms in 2016 and 2017. In the past year, the bank has allocated funds for 40 deals, including refinancing the Dundrum Town Center, one of Ireland's largest shopping malls, worth 625 million EUR.
The Paris-based bank Natixis SA emerges as one of the most active lenders in the US market. At the end of last year, it became a leading partner in a group that lent Cottonwood Management for 480 million USD. This is a mixed-purpose project with an area of ​​over 800,000 square meters in the Boston port area.
There are also financial institutions in some countries, such as Greece, which are in a tragic situation. The shares of even the best-capitalized banks are avoided by investors because of their lower profitability. The bank lending on real estate, however, is definitely gaining momentum and returns to fashion among the creditors, which have restored the health balance.
Bankia is currently building a fairly large portfolio of loans to finance housing in Spain. The financial institution's expectations are that, within about three years, a market share of 8% will be achieved in the real estate financing sector.
The availability of debt financing is a sign of the health of the European real estate market. The sales of business properties are strong, which supports price growth, and in some markets they also achieved new records. Last year, only business investment in Europe amounted to 312 billion EUR, compared to 281 billion EUR in 2016.
In some places, however, prices are so high that some regulators are getting nervous. Speaking to the European Parliament (EP) in February, the European Central Bank (ECB) President Mario Draghi pointed out that the business property segment needs "strict monitoring" to guard against a possible bubble. The recovery of bank balances comes after a long period of weakness due to the 2008 global financial crisis.
Some banks earlier managed to return to lending to the property sector. ING Groep NV did so at the end of 2013, partly because it was forced by the ECB to enrich its portfolio.
At the end of 2016, the Eurozone domestic banks granted real estate loans amounting to 947.3 billion EUR. For comparison at the end of 2014, the volume was 910.7 billion EUR.
The European bank lending for the property sector is rising sharply in the United States. Only the US branches of German banks have granted 24 billion USD in loans only in the third quarter of 2017 compared to 14 billion USD in the third quarter of 2015.
Some lenders are trying to increase their market share by offering more loans than the value of the property. However, many European bank managers say they are trying to learn from past mistakes and avoid mitigating their standards for customer and project research. In their view, competition has so far been to reduce interest rates, which reduces borrowing costs for many investors, even in conditions of rising key interest rates.