What is ČSOB’s current strategy for real estate lending?
We’ve always tried to diversify our lending between the individual sectors, meaning in logistics, offices, retail, and residential. Of course, we largely follow market activity depending on where there’s a lot being built or sold. Naturally, that means the structure of the portfolio changes slightly over the years. Depending on the market cycle and any potential external shocks or world developments, one of the sectors might be impacted more than others. That’s the argument for diversification. Nobody could have anticipated COVID would come, and that it would hit retail and offices. Or that logistics would enter a boom period. Even now, something else could happen to completely reverse this. So we divide our activity between the four sectors.
The one where we’ve increased significantly in recent years is lending for rental housing projects. We saw the market opportunity and made it a goal of ours. The sector is developing positively and we see this continuing in the future. This is one area where our view has really change in recent years.
At what stage of a project do you usually get involved with financing?
In all of the sectors, we’ll generally finance both the construction of new buildings, as well as the refinancing or finished real estate and of investments. It fluctuates, but we general have between 15-20% of our total lending going towards construction, while 80 – 85% tends to be committed to long-term financing.
There’s not much new office being built, so how do you evaluate that sector?
For financing banks, the Czech office sector is doing relatively well. There’s relatively moderate vacancy here and we are below the European average. There’s very little new office being built at the moment, though we are financing something now. But I share the general opinion that while it’s not a complete shortage, there will be very little new supply this year and next. If we look at the medium-term horizon for office vacancy, despite the new hybrid model of work, we view the sector optimistically simply because so little is now being built.
What is your lending book and how is it structured?
We’ve lent out over CZK 75 billion between the various types of real estate I mentioned. That’s the size of our loan book at the moment. It makes us one of the four largest property lenders. For the biggest deals, we either cooperate through syndicated loans. For the most part, we’re competing with the other large Czech banks, and sometimes with the German banks.
Is that your limit, or are you looking to grow in size?
It’s not a final limit for us. But the bank’s appetite for growth in real estate is re-evaluated every year. In general, there’s always been some type of growth, except for during the Covid period. We’re always interested in growth, but each year the plan can be a bit different according to how we see the market.
What’s your current view for 2025?
This year is different in that the residential development sector is extremely active. This has driven relatively large growth in new business. We perceive the market positively. We see that there was some postponed demand, but not only postponed demand from 2023, when mortgage interest rates jumped, interest rates on savings products were high, and people were waiting from sales from purchases of apartments. This already started changing last year and it continues to accelerate this year.
You can see this in mortgages, since there’s strong demand for apartments in Prague and in regional cities. Prices are rising rapidly – according to ČSOB Housing Index, the apartment prices across the country increased by 10% year-on-year in the first quarter of 2025, but construction work hasn’t grown so intensely. So developers have the appetite now to put more apartments on the market.
Developers have also succeeded in getting projects approved. More than half of our activity in the first quarter of the year was made up of residential projects. We need to maintain a diversified portfolio though, so we’re looking more now at other sectors. On a relative basis, we already have a lot of residential.
Pavel Malecha was named Head of Real Estate Finance at ČSOB in February
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