A German bank says it's preparing for the worst property crisis since '08 as commercial real estate distress spreads - Yahoo Finance | Canada News Media
Deutsche Pfandbriefbank warned that the commercial real estate sector faces a crisis on par with the 2008 downturn.Reinhard Krause/Reuters
Deutsche Pfandbriefbank AG said it’s bracing for an ongoing decline in commercial real estate.
It called the downturn “the greatest real estate crisis since the financial crisis.”
Shares of the German bank have declined about 25% year-to-date.
Signs of commercial real estate distress continue to mount, with the latest warning coming from German lending giant Deutsche Pfandbriefbank AG.
In a statement last week that followed a slump in the price of its bonds, the bank likened the current property market crisis to the real estate catastrophe that roiled global markets 16 years ago. It said it shored up its risk provisioning for the year ahead with as much as $231.7 million set aside to deal with pain across the real estate sector.
“Despite these expenses, pbb remains profitable thanks to its financial strength – even in the greatest real estate crisis since the financial crisis,” the bank said in a statement February 7.
The German bank said it has enough cash and assets to withstand the turmoil, and that it can operate for six months without fresh funding from investors.
The bank said its “liquidity coverage ratio,” which refers to its ability to pay off short-term obligations, is double the regulatory requirement, and it plans to publish further details in March.
Commercial real estate fears have swirled worldwide in the last year as central banks hold interest rates higher than they’ve been for the last decade and work-from-home trends crush the values of office properties.
In the US, Moody’s Analytics reported that the national office vacancy rate hit a record 19.6% in the final quarter of 2023, about 280 basis points above pre-pandemic levels.
“Despite the increasingly optimistic consensus on the likelihood of a macroeconomic soft landing along with positive news from the labor market, the permanence of dynamic hybrid models has effectively muted office demand, making the year of 2023 the most downbeat since the Great Financial Crisis,” Moody’s strategists wrote in a January note.
To that point, more than $150 billion of mortgages on US office buildings are set to mature in 2024, and about $300 billion are due in 2026, according to CommericalEdge. Landlords could struggle to refinance that debt as they deal with higher interest rates and lower property valuations.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
