German Real Estate Banks Struggle with Increasing Loan Defaults Amidst a Prolonged Crisis

München The German real estate banks are struggling with increasing loan defaults and are preparing for a longer dry spell. The crisis on the real estate markets will last “more severely and longer” than expected at the beginning of the year due to rising interest rates and the weak economy, declared the Deutsche Pfandbriefbank (pbb) on Thursday in Garching near Munich. It won’t get any better until early 2024 at the earliest.

“The search for a new price equilibrium in the German real estate market is ongoing,” said Jens Tolckmitt, Managing Director of the Association of German Pfandbrief Banks (vdp). Prices, especially for office and retail properties, continued to fall in the second quarter, albeit not as quickly as at the beginning of the year.