that saw German leasing make unprecedented leaps forward, the
market is showing signs of major change ahead. Fred Crawley reports.
Even as the slowdown that began to
impinge upon growth rates as 2007 wore on, the German Leasing
Association (BDL), in conjunction with the ifo Economic Institute,
reported year-end figures that showed national investment levels up
by 9.1 percent, with leasing growing at the same rate and forming
18 percent of the national investment total.
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This 9.1 percent growth rate, however,
factored in the relative stasis of the real estate market, which
only grew by 2 percent. The equipment leasing market taken alone
registered a growth of 11.9 percent over 2007, and accounted for
23.3 percent of all equipment investments by year end.
First-half results for 2008 looked
shakier though, seeing an increase of 9.6 percent year-on-year for
equipment leasing business. Even that growth, according to BDL, had
been substantially bolstered by a few well-timed big ticket deals
in 2008.
Now, BDL expects a growth of 8 percent
at best for the German equipment leasing business in 2008, with 6
percent (which would halve the former interannual growth rate)
being an equally likely figure.
Germany, more than any other economy
in Europe, has integrated leasing deeply into its manufacturing and
financial superstructures, and as such the approaching year-end
will make clear exactly how badly recent financial shock has
burdened German leasing.
Hope may spring from the fact that
with the approach of Basel II and onset of the international
liquidity shortage, German banks are becoming less and less likely
to lend money to companies with anything but an investment-grade
rating.
While two-thirds of German companies
currently use at least some leasing to finance procurement of
equipment, especially in the SME sector, this number is only going
to increase as the generosity of the banks dries up.
Another major factor in the fate of
German leasing is the health of the automotive industry, since so
much of the leasing economy is anchored in vehicle manufacture.
Even discounting commercial vehicles as an asset, car leasing makes
up half of Germany’s leasing turnover, since so many of the big
manufacturers and their captives are based there.
In many cases now, these captives have
evolved into full banks such as Volkswagen Bank and BMW Bank, with
MAN financial services recently having announced similar
intentions.
With these banks still profitable, and
results from H1 2008 showing the substantial car segment to be the
only asset type to increase interannual growth rate since Q4 2007,
there may yet be a silver lining for this vital German
industry.
Although Germany has an
extraordinarily well developed real estate leasing market, it has
seen little growth in the last two years and seems set to see
little more this year.
What little growth 2007 saw was
concentrated in commercial property, which increased by 4.3 percent
against almost no growth at all in other sectors.
BDL puts the overall stasis down to
competition with other finance models in the construction sector,
and sees little reason for things to change soon.
An antidote to this stagnation may
well lie in the potential of the public sector, as seen in
Entry to the state.
