FRANKFURT (dpa-AFX) - The Association of German Pfandbrief Banks (VDP) believes that the peak of the crisis on the real estate market is still to come. "We expect the crisis to peak next year," VDP President Gero Bergmann told journalists in Frankfurt on Wednesday evening. The association, which represents the most important real estate financiers in Germany, including Deutsche Bank, Commerzbank, Landesbanken and large savings banks, believes that further price declines can be expected in the coming quarters.

There will be a stabilization in 2024, Bergmann said. "It is likely to start much earlier for residential real estate than for commercial real estate." A key prerequisite for this would be falling interest rates. Bergmann referred to expectations on the capital market that the European Central Bank is likely to cut key interest rates in the coming year - possibly as early as the first half of the year.

A sharp rise in interest rates and construction costs as well as high inflation have put an end to the long real estate boom. According to VDP data, residential real estate prices fell by an average of 1.7% in the third quarter compared to the second quarter. Compared to the same period of the previous year, prices were down 6.3 percent. Commercial real estate fell even more sharply.

Signa insolvency with consequences for commercial real estate

The crisis in commercial real estate in particular, which is suffering from office vacancies and tough times in the retail sector, is worrying supervisors who fear risks for bank balance sheets. The most prominent example of the crisis is the insolvency of billionaire René Benko's Signa holding company.

Bergmann did not comment on the specific consequences of the bankruptcy for the market and individual banks. "However, nobody can be happy when big names go bankrupt, and this will of course also have an effect on the market." The price reductions for commercial properties are also likely to be greater than for residential properties in 2024. In general, he is confident that the banks will come through the real estate crisis well, said Bergmann. "However, I would not be surprised if we see an increase in risk provisioning at the banks."

The bankruptcy of the Signa holding company also threatens to burden the financing banks. The US rating agency Moody's has warned that the insolvency will affect the credit quality and profitability of some banks in Germany, Austria and Switzerland./als/DP/tih