In the current prevailing low interest environment many retail investors view retail estate as an attractive alternative form of investment instead of savings accounts and other capital market products. The Austrian Financial Market Authority (FMA) has therefore conducted an in-depth analysis about the market for so-called “Immobilienanleihen” (real estate bonds). As the FMA market analysis has shown, many such bonds may also be subscribed to by retail investors. For many investors, the term “Immobilienanleihe” suggests a particular degree of security, that is not always actually the case. The FMA therefore advises investors to inform themselves adequately about the potential risks entailed in relation to such investments. FMA Executive Directors Helmut Ettl and Klaus Kumpfmüller remarked: “The term real estate is often considered to be synonymous with stability and security. However investing in such real estate bonds should not be allowed to be confused with an investment in real estate. Investors must be aware that by investing in such real estate bonds that they participate in the risk associated with an entity, but not the risk associated with a physical property.”
According the the FMA’s market analysis, at the time of the analysis being conducted in April 2018 189 such real estate bonds had been issued on the Austrian capital market by 82 issuers, with a total outstanding planned issue volume of € 6,496.5 million.
The term Immobilienanleihe (real estate bond) does not have any legal significance. It is using used for bonds issued by undertakings that invest in the construction, acquisition, development or management of real estate. The term does not in any way guarantee that a bond is secured directly by the value of the real estate or other guarantees. In fact, the opposite is true. The majority of the bonds that are available to retail investors are unsecured. In the event that the issuer of the investment should fall into financial difficulties, then this may therefore in the case of such so-called Immobilienanleihen (real estate bonds) lead to losses being incurred on the investment or even default. In the past such bonds promising very high returns despite very short terms have proven to be particularly high risk. In such cases there is often a heightened risk of defaulting on the debt. “As is the case with all investments, it is also the case in this instance that the higher the return, the greater the risk,” remarked FMA Executive Directors Helmut Ettl and Klaus Kumpfmüller.
For such bonds that are also intended for retail investors, issuers are required to submit a securities prospectus for issues with a volume of € 2 million and over, which must contain all information about the risks associated with the bond. The FMA checks securities prospectuses for their completeness, coherence and comprehensibility. Issuers of such real estate bonds are as a rule not subject to solvency supervision by the FMA.
Investors can find a thematic focus about such real estate bonds on the FMA’s website at
https://www.fma.gv.at/en/fma-thematic-focuses/fma-focus-on-real-estate-bonds/
Journalists may address further enquiries to:
Stefan Maier
+43/(0)1/24959-6001
+43/(0)676/882 49 426