Although European commercial and residential real estate remains attractive, risks are rising. Purchase prices across all asset classes are high, yields are low and investors continue to feel high investment pressure. This is compounded by high land prices, rising construction costs and expectations that financing costs will become more expensive.

In this market phase, property financing is challenging for banks. They face rising capital requirements and uncertainty about interest rate levels, which are affected by factors such as Brexit, a slowdown in Germany and unresolved trade conflicts.

Interest rates — only a slight uptick

At present, it appears that the long-anticipated hike in ECB interest rates has been postponed for another year. And even if interest rates in the euro zone begin to rise over the course of 2019, we expect only a moderate increase due to the economic weakness of countries in southern Europe and the expected economic sl