Frontpage News 2016 Strong competition...

Strong competition for property projects

31 August 2016

​Even though the market for construction projects is rapidly developing, banks are not at risk. The Danish FSA concludes this in a new study of project financing in Aarhus and Copenhagen. The report can be read in Danish here.
 
The report confirms the Danish Bankers Association’s picture of developments in the two cities. The cities are growing and there is hard competition for lending, but banks are able to support city developments without taking larger risks.
 
“Banks have an important role as a creditor, when cities become larger. Building projects have a larger risk and we are, therefore, pleased to see that banks are maintaining healthy credit policies, even when the market is developing quickly,” says the Economic Executive Director at the Danish Bankers Association, Jakob Legård Jakobsen
 
The risk with building projects is particularly large, if a buyer and tenant are not found for every square meter when the building process begins. This would make the project particularly vulnerable to a downturn in prices.
 
Therefore, it is positive that banks require larger amounts of self-financing and lower borrowing, if the project has not sold out in advance. This reduces the risk.
 
“Banks are reporting hard competition on the market and that is good for customers. It is, however, crucial that competition does not mean that credit standards are compromised. This was part of the cause behind the financial crisis and something that must be avoided. Fortunately, the Danish FSA’s study indicates that banks have learnt from the financial crisis,” Jakob Legård Jakobsen says.
 
Further information:
Please contact Stine Luise Hansen, Head of Media Relations at the Danish Bankers Association by telephone: +45 3016 1009 or by e-mail: slh@finansraadet.dk
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