THINKING ABOUT REAL ESTATE FINANCE AND ESG AS A WHOLE

The real estate industry is dependent on a stable and predictable financing environment in the long term in order to master the challenges of the future. This is all the more true in view of the immense financial challenges that the European Green Deal, the current interest rate and inflation trends as well as the geopolitical risks will bring.

Low construction interest rates have long been the lifeline in the increasingly difficult investment environment. The kick-off meeting in the Alliance for Affordable Housing identified an accumulation of several crises - galloping away interest rates are among the significant effects. The first project developers and portfolio holders are already beginning to suspend their activities as borrowed capital is becoming too expensive. It is already certain that this will significantly slow down investment behaviour in the coming weeks. In times of discussion about affordable construction and housing, market-inhibiting measures such as the introduction of a systemic risk buffer for residential property financing have a counterproductive effect and further aggravate the already precarious situation in urban areas. As a result, the federal government's self-declared goal of building 400,000 new homes annually could become a distant prospect.

Due to the new circumstances, European and national financial market regulation as well as supervisory practice must be adapted with foresight. Regulation and supervision must be designed in such a way that the financing of real estate projects is also made possible in the future, especially against the backdrop of a possible credit crunch for all those projects that do not meet the strict criteria for real estate and tangible asset investments within the framework of the EU taxonomy. To this end, it is particularly important that measures adopted at national as well as European level are coherent in terms of timing and content, interlock with each other and contribute to achieving the climate targets.

The goal must be to enable a future-oriented development of taxonomy-compliant real estate quotas and to ensure that this understanding is lived by all actors, be they banks, investors or supervisory bodies. However, financial market products must also be available for the transformation towards sustainability, because it is precisely for this that considerable investment sums are needed from professional and private investors. This is especially true for the real estate portfolio.