Sentiment amongst commercial property lenders improved significantly in the third quarter of 2026. More institutions are reporting growth in new business, whilst financing conditions have largely stabilised. This is shown by the latest BF Quarterly Barometer, which was covered last week by publications including Immobilien Zeitung and portfolio institutionell. The barometer reading, compiled by BF.direkt in collaboration with the Handelsblatt Research Institute, has risen from minus 25.97 to minus 12.30 points. Despite remaining in negative territory, this indicates a noticeable recovery compared with the previous quarter.
The trend in new business is contributing significantly to the improved sentiment. 35 per cent of the lenders surveyed report an increase, compared with just 23 per cent in the second quarter. None of the respondents reported a decline, compared with 23 per cent in the previous quarter. Pressure is also easing with regard to financing conditions. Only 15 per cent now report a deterioration, compared with 46 per cent in the second quarter. The remaining 80 per cent reported unchanged financing conditions.
With regard to financing margins, the differences between existing properties and property developments remain significant. The average lending margin for existing properties stands at 156 basis points, which is slightly below the previous quarter’s figure. Residential properties, at 120 basis points, have the lowest average margin of the property types surveyed. For property developments, by contrast, it stands at 273 basis points. The margin refers to the premium charged by the lender on top of the underlying reference rate. The average loan-to-value ratio for existing properties – that is, the ratio of the loan to the property value – remains virtually unchanged at 64.5 per cent.
At the same time, alternative sources of funding are gaining in importance. According to the detailed quarterly report, 35 per cent of respondents have observed rising demand for alternatives to traditional bank loans. Equity-like forms of financing, as well as equity from partners in joint investment projects, are in particularly high demand. Property financing is therefore increasingly supported by a broader range of capital sources.
However, the improvement in sentiment does not yet indicate a broad-based improvement of the in market conditions. Three-quarters of respondents expect higher interest rates for property loans with a ten-year fixed interest rate by the end of the year. Furthermore, the barometer reading remains below the level recorded in the first quarter. When interpreting the results, the survey period must be taken into account: the survey took place from 31 August to 8 September. Subsequent changes in the economic environment are therefore not reflected in the responses. The barometer therefore points to a recovery from the previous quarter’s weak reading, although the outlook remains uncertain.
“The growth in new business and the more stable financing conditions are encouraging signs for the property market. They create more favourable conditions for planning and making investments,” says Jacopo Mingazzini, a member of the Executive Board at The Grounds. “Solid financing and a realistic assessment of long-term earnings prospects remain crucial. Particularly in the residential property sector, investors should carefully assess the quality of the location and the property portfolio. Those who take these factors into account can make sound investment decisions even in a challenging interest rate environment.”
