Ger­man so­cial hous­ing sec­tor to seek more ac­cess to cap­i­tal mar­kets

Financial Mirror (Cyprus) - - FRONT PAGE -

More Ger­man mu­nic­i­pal hous­ing com­pa­nies are likely to seek cap­i­tal mar­ket ac­cess as chang­ing so­cial hous­ing pol­icy in­creases their fund­ing needs, Moody’s Public Sec­tor Europe (Moody’s) said in a re­port.

“We ex­pect hous­ing com­pa­nies to in­creas­ingly tap cap­i­tal mar­kets over the next few years, ow­ing to grow­ing hous­ing de­mand in Ger­many’s larger cities and be­cause of the Ger­man gov­ern­ment’s re­newed com­mit­ment to in­vest in so­cial hous­ing,” said Har­ald Sper­lein, a se­nior an­a­lyst and a co-au­thor of the re­port.

The growth of some Ger­man cities has led the public sec­tor own­ers of so­cial hous­ing com­pa­nies to draw up am­bi­tious growth and in­vest­ment pro­grammes. How­ever, given con­straints on lo­cal gov­ern­ment bud­gets, some of these in­vest­ments are debt-fi­nanced at the com­pany level, lead­ing to these in­creased fund­ing re­quire­ments.

“Tra­di­tion­ally, Ger­many’s mu­nic­i­pal hous­ing in­vest­ments have been prin­ci­pally funded by bank loans, but cap­i­tal mar­ket in­stru­ments are be­com­ing in­creas­ingly at­trac­tive for public en­ti­ties who need long-term fund­ing to match their as­sets,” Sper­lein added.

This is be­cause the re­cent tight­en­ing of banks’ cap­i­tal re­quire­ments has made long-term lend­ing at com­pet­i­tive rates less at­trac­tive for fi­nan­cial in­sti­tu­tions. There­fore, Moody’s ex­pects more so­cial hous­ing en­ti­ties to tap the cap­i­tal mar­kets di­rectly by is­su­ing bonds and other fi­nan­cial in­stru­ments in­stead of rais­ing bank fi­nance, po­ten­tially match­ing the growth tra­jec­tory the rat­ing agency has seen in the English hous­ing as­so­ci­a­tion sec­tor.

Moody’s notes that the Ger­man so­cial hous­ing sec­tor’s role in de­liv­er­ing public pol­icy im­plies strong gov­ern­ment sup­port and su­per­vi­sion, a credit pos­i­tive. The Ger­man gov­ern­ment’s re­cently an­nounced com­mit­ment to strength­en­ing in­vest­ment in hous­ing and re­viv­ing so­cial hous­ing de­vel­op­ment would strengthen these credit pos­i­tive ties.

The sec­tor also ben­e­fits from a strong in­sti­tu­tional frame­work, in­clud­ing public own­er­ship which en­tails fi­nan­cial, op­er­a­tional, and reg­u­la­tory links with the public sec­tor, a credit pos­i­tive in Moody’s view.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.