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Commercial Real Estate: Europe: Difference between revisions
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* In the banking sector, a significant share of loans have an LTV ratio above 80% in a number of countries, which indicates that the sector is highly exposed to changes in CRE prices. Declining CRE prices could lead to rising LTV ratios, pushing up capital requirements and undermining the ability of banks to provide credit. | * [[File:CRE5.PNG|thumb|Share of CRE investment transactions in the EU by buyer type]]In the banking sector, a significant share of loans have an LTV ratio above 80% in a number of countries, which indicates that the sector is highly exposed to changes in CRE prices. Declining CRE prices could lead to rising LTV ratios, pushing up capital requirements and undermining the ability of banks to provide credit. | ||
* Even for loans with LTV ratios that might appear more conservative, the aggregate information might hide other, riskier characteristics, such as a bullet repayment scheme, a non-recourse structure, variable unhedged interest rates or long maturities | * Even for loans with LTV ratios that might appear more conservative, the aggregate information might hide other, riskier characteristics, such as a bullet repayment scheme, a non-recourse structure, variable unhedged interest rates or long maturities | ||
* The NPL coverage ratio for CRE loans is much lower than that for total loans to NFCs. | * The NPL coverage ratio for CRE loans is much lower than that for total loans to NFCs. | ||