Categories News

Credit risk in banks has not yet undergone a fundamental assessment

According to a report published on Thursday, the central bank of Germany is estimating a downturn but no serious correction in the property market of the country, even with warnings of overvaluation.

Vice president of the Bundesbank, Claudia Buch told CNBC’s Joumanna Bercetche: “We are seeing a turndown in the price growth for residential real estate, but it’s not that the overall dynamic has reversed, so we still have overvaluations in the market.”

The increase in residential property prices from 2010 to mid-2022 and overvaluations in the market has increased in German cities and towns ranging from 15% to 40% and throughout the country in 2021.

Analysts have predicted an acute decline for the sector, including at Deutsche Bank. Housing prices have already reduced by around 5% since March, according to forecasts by Jochen Moebert, a macroeconomic analyst at the German lender house prices will fall between 20% to 25% in total from peak to trough variation.

Buch said that the extent to which the easing of credit criteria brought on by a very rapid rise in residential mortgage credit raised concerns for the central bank.

“There we also see a slowdown, so we don’t currently think that additional measures are taken to slow down the build-up of vulnerabilities in this market segment, but we do think the market need to keep monitoring because we know that private households are extremely exposed to mortgage loans, being  the biggest component in private household debt,” said Buch.

Additionally, Buch said that households are less exposed to increasing interest rates than in some other countries because the market has the highest share of fixed-rate mortgages.

Buch said, “Of course, the risk doesn’t disappear, it’s still in the system, but this exposure to interest rate risk is large with the financial sector, the banks who’ve done that lending concerning mortgages.”

And also other issues have been highlighted in the Financial Stability Review for 2022 by the Bundesbank, such as the declining macroeconomic environment, the downturn in German economic activity, rising energy prices, and the decline in real disposable income.

It reports that the German economy has reached a “turning point” as a result of financial market price corrections that have caused portfolios of assets to be written down. Additionally, the lists rising collateral requirements for futures trading as well as rising dangers associated with business loans.

Despite the fact that the credit risk in banks has not yet undergone a fundamental assessment, it claims that its financial system is “susceptible to adverse developments.”

Buch said that it is clear that we need a financial system that is strong enough to keep building up resilience over the next time.

Follow and Connect with us: Twitter, Facebook, Linkedin, Instagram

Team iPropUnited

Share
Published by
Team iPropUnited

Recent Posts

Why Tier-2 and Tier-3 Cities are the Future of Indian Real Estate

India’s real estate market is undergoing a profound transformation, with Tier-2 and Tier-3 cities emerging…

4 days ago

A Thriving Year for Residential Real Estate, but Affordable Housing Challenges May Continue in 2025

Developers anticipate the strong momentum in premium and luxury housing to carry forward into 2025,…

6 days ago

Minimalist Interior Design Tips for a Classy Home

Minimalist interior design has become a global trend, celebrated for its simplicity, elegance, and functionality.…

1 week ago

How Technology is Revolutionizing Real Estate in India

The real estate sector in India, traditionally known for its slow-paced processes and manual operations,…

2 weeks ago

Fractional Ownership in Real Estate: Democratizing Property Investment

The real estate sector, traditionally a playground for high-net-worth individuals, is undergoing a transformation with…

2 weeks ago

The Yamuna Expressway Authority has received 1.12 lakh applications for 451 plots located near the Noida Airport.

Real estate experts highlighted that the strong response reflects the growing residential demand in the…

3 weeks ago