US real estate advisory firm The Situs Companies predicts loan portfolios worth as much as EUR 15 bn could be exchanged in Europe during 2012, as banks increasingly look to reduce the number of maturing loans on their books.

A total EUR 170 bn of European real estate loans are set to mature by the end of 2012.

Situs expects the increased volume of loan trades to span most of Europe's financial centres, with banks based in the UK, Ireland, Spain and Germany to be most active in the transaction market.

Three key factors will fuel this expected increase in loan trading activity, according to the Situs research. Pressure from central governments on banks to deleverage their balance sheets will combine with increased liquidity needs to force banks to market, Situs predicts.

In addition, Situs claims the gap between the price banks are prepared to sell at and that investors are willing to pay is likely to shrink as increasing numbers of investors enter the market.

Situs believes that the most likely buyers of loan portfolios will be investment funds, traditional real estate investors, private equity and hedge funds, with the pricing of loans varying according to quality and granularity of each portfolio coming to the market. Situs observes that to date, discount rates have varied from near parity with face value, to below 20% of face value.

Situs says that an increase in transactions will provide more market transparency on pricing.