“The construction sector has come to a virtual standstill in recent months, as has construction financing,” said the Vice President of the Central Real Estate Committee (ZIA), Jochen Schenk, this week.
Schenk pointed out that new applications for construction financing at the end of 2022 had fallen by 43 percent compared to the same period last year: “This is a negative record that has never existed in this form before.” He named the steep rise in interest rates as the main problem, even if this was not the sole reason for the decline. According to Schenk, banks are forced to act more cautiously. This is not only due to general risk provisioning, but also because of increasing regulation – be it through the criteria of the residential real estate credit directive, the activation of the countercyclical capital buffer or the introduction of the sectoral systemic risk buffer.
Deutsche Bundesbank Vice President Claudia Buch has meanwhile rejected demands from the industry to relax certain capital requirements for banks, such as the countercyclical capital buffer, in order to allow additional lending. For the first time in years, the ongoing crisis might lead to redundancies in construction, warned CEO Felix Pakleppa from the ZDB association recently.
