As it is common knowledge, the real estate sector has been one of the hardest hit sectors in recent years, the real estate sector has been one of the sectors that has been hit the hardest during the last years after the shocks generated by the social crisis that started in 2019 in our country and the beginning of the pandemic. following the shocks generated by the social crisis that began in 2019 in our country and the onset of the pandemic.

One of the reasons for this is that These adverse events generated a significant increase in the cost of construction materials, This was also reflected in higher levels of local and international inflation.

To mitigate this inflationary scenario, the Central Bank of Chile had to initiate a process of raising its reference rate, which, in turn, has raised the level of mortgage rates, This in turn has had an impact on sales for companies in the real estate sector.

In addition, in this uncertain context for the real estate sector, banks have imposed greater credit restrictions on the sector in an attempt to reduce their exposure to the real estate sector.

In this way, Many real estate companies have had problems in accessing sources of financing, On the one hand, they have seen a lower dynamic in their sales, affecting their cash flows from their operations; and on the other hand, their sources of access to credit financing have been reduced in the face of a more restrictive banking system.

This dynamic has lasted for some time, and during the month of July the Central Bank of Chile published the results of the Bank Credit Survey for the second quarter of 2024. The purpose of this survey is to provide information on the perception of changes in credit approval standards and the demand for bank financing, and it is conducted among bank executives responsible for the credit areas of banking institutions. Thus, the results of this survey reflects the behavior of the supply and demand of bank loans for the Consumer, Mortgage, Large Companies, SMEs, Real Estate and Construction portfolios.

In general terms, the results for last quarter's survey indicate that the conditions under which banks offered loans to these portfolios during the second quarter of this year did not present significant variations with respect to the first quarter of the year, and therefore continue to be restrictive. did not present significant variations with respect to the first quarter of the year, so they continue to be restrictive. Meanwhile, in general, demand for loans was weaker, except in the cases of demand for loans to Large Corporations and Mortgages, which were stable.

For the Real Estate and Construction portfolios, conditions also remain tight: the proportion of real estate companies reporting more restrictive conditions rose from 27% (last quarter) to 40% (this quarter), while for construction companies this figure remained at 30%.

Regarding demand for credit, the proportion of banks perceiving lower demand from real estate companies increased from 36% to 50% this quarter. Similar to the case of construction companies, where this percentage increased from 40% to 50%.

Although the participation of banks in the capital and investment structures of real estate projects is declining in this context, it is the real estate debt investment funds that have managed to increase their participation in this market, real estate debt investment funds have managed to increase their participation in this market. Thus, these conditions represent an opportunity opportunity, allowing more "retailThese conditions represent an opportunity, allowing more "retail" investors to participate in good projects, managed by consolidated real estate companies in the market, which in other times would have been impossible to access, since they would probably have been disputed by the banks.

In this sense, at Fynsa we did not want to miss out on this opportunity, and through the investment funds "Fynsa Deuda Inmobiliaria" and "Fynsa Deuda Inmobiliaria", we have created a new investment fund for the real estate market.Fynsa Real Estate Debt" y "Fynsa Real Estate Debt II"we have given our investors access to this asset class. (SEE MORE)

In the same vein, in the coming weeks we will be announcing a new investment vehicle we will be announcing a new investment vehicle to continue to take advantage of the aforementioned to continue to take advantage of the aforementioned real estate and credit market conditions.

José Pablo González
Portfolio Manager Private Debt Fynsa AGF