The bank tightens the criteria for granting credit for real estate

European Central Bank interest rates rose in a short period of time from zero to 4.5%, shocking families with mortgages, creating obstacles for those seeking a home loan. a house. In the context of the economic slowdown and decline in the real estate market, banks will adopt a more cautious stance and tighten the criteria for granting financing, especially to companies in the building construction sector and real estate activities.

The latest “Banking Credit Market Survey”, conducted by the Bank of Portugal, reveals that national banks will, at least in the first half of this year, adopt “slightly more restrictive credit granting criteria for companies operating in the construction, buildings and facilities sector.” “Real estate activities,” referring in particular to the commercial sector. This position is taken at a time when there is a “slight decline in demand for loans to purchase housing” by individuals and a double decline in home sales last year.

The real estate sector has already begun to feel this pressure. “We had more difficulty obtaining financing,” he began his interview with Jornal Económico Hugo Santos Ferreira, noting that “the issue of access to financing was essential, especially to build more housing on a large scale and at lower prices.”

“The greater difficulty in obtaining financing, as a result of increasing interest rates, has been one of the problems that property developers are specifically dealing with,” highlights the President of the Portuguese Association of Real Estate Developers and Investors (APPII). To build more affordable homes. “It is a problem that affects everyone in this sector, especially in the field of real estate development,” he said, stressing that the strictest standards apply to both the commercial and residential sectors. “I would say it's general in all aspects,” he says.

The latest data from the regulator, released at the start of the year, shows that the average interest rate on new loans to businesses rose from 5.89% in October to 5.94% in November. This increase was justified by new loans worth more than one million euros, for which the average interest rate rose from 5.64% to 5.78%.

During this period, the volume of new loans granted by banks to companies amounted to 1,701 million euros, an increase of 157 million euros over the previous month. However, the Bank of Portugal notes in its “Recent Banking Survey on the Credit Market” that there has been a “slight decline in demand.” [por crédito]By small and medium enterprises and large companies, especially through long-term loans.”

A decrease in the number of projects reduces the demand for credit

This trend of declining demand for financing from banks is expected to continue in the first half of the year. The financial sector expects that there will be “a slight decline in demand for loans by companies in manufacturing industries, especially energy-intensive industries, and in the building construction sector and real estate activities, both commercial and residential.”

This decline in demand occurs in a context where there are fewer projects underway. “We have seen a slowdown in the construction of new projects in recent years. In fact, we have warned about this. Every year and every decade, we build less and less,” notes the President of APPII.

According to Hugo Santos Ferreira, “projects are becoming less viable in Portugal due to the increase in context and construction costs and the increase in prices”, which conflicts with the need for “more supply and solution to the problem of access to housing”.

Moreover, he concludes, “The last year was very intense in terms of legislative production, much of it detrimental to the sector, which naturally alienated many promoters and investors from Portugal and led to many projects remaining in disarray. commentMost of them are for housing.”