• Volume of finance provided by vdp member banks rises to EUR 39.8 bn
• vdp addresses BaFin’s concerns over LTV ratios in connection with Bundesbank’s “WIFSta” survey

Between January and March of this year, the banks which together make up the Association of German Pfandbrief Banks (vdp) granted property loans totalling EUR 39.8 bn. Compared with the corresponding quarter in 2025, this represented an increase of 5.9% (Q1 2025: EUR 37.6 bn). Positive growth (4.2%) was likewise recorded compared with the immediately preceding quarter (Q4 2025: EUR 38.2 bn).

The greater part of total property finance in the quarter under review was again accounted for by residential property loans. Here, new lending amounted to EUR 25.2 bn, which was up by 2.4% year on year (Q1 2025: EUR 24.6 bn). The volume of new loans for commercial properties rose at a somewhat faster pace, with a growth rate of 12.3%, albeit from a low level when viewed over the long term. The total achieved was EUR 14.6 bn (Q1 2025: EUR 13.0 bn).

“Loan-to-value ratios calculated by the Bundesbank on the basis of WIFSta overestate the actual risk.” Jens Tolckmitt

“The property finance market was still experiencing a slight upswing at the beginning of 2026. However, the potential effects of the Iran war on lending will not be seen until the second quarter,” vdp Chief Executive Jens Tolckmitt pointed out. Moreover, he responded to recent statements by the Federal Financial Supervisory Authority (BaFin), which had spoken of increased risks in property finance following the Bundesbank’s “WIFSta” survey results for the fourth quarter of 2025. (WIFSta is a data collection system for residential property lending.) “The loan-to-value (LTV) ratios calculated on the basis of WIFSta overstate the actual risk. This is because a WIFSta LTV refers only to the property to be financed – additional collateral provided by borrowers when the property to be financed is not sufficient as collateral is not taken into account.” What is more, a high LTV generally goes hand in hand with a high borrower credit rating, which would mean a low probability of default in these cases, Tolckmitt said.

“The reasons for the high LTVs are to be found on the cost side,” Tolckmitt continued. He explained that, on the one hand, transaction costs in Germany are comparatively high; on the other, building costs have surged over a long period of time. With its plans regarding building type E, the German federal government is on the right path to counter further cost increases, he said, but this will not lead to a drop in borrowing requirements in the short term.

Regarding the prospect raised by BaFin of the activation of macroprudential instruments, Tolckmitt remarked that such a step would only be justified if a self-reinforcing spiral of rising property prices, relaxed lending standards and rapidly rising lending were to occur – which is not the case, however. He commented that property price increases are roughly in step with inflation, lending is showing only moderate growth overall, and lending standards are stable. The Bundesbank confirmed as much in its recent Bank Lending Survey, Tolckmitt pointed out.

Residential property loans: one- and two-family houses predominate

Of the total volume of loans granted by Pfandbrief banks for residential properties amounting to EUR 25.2 bn, EUR 11.9 bn or 47.2% was accounted for by loans for one-and two-family houses. These were followed by loans for multi-family houses to the tune of EUR 6.5 bn (25.8%) and condominiums totalling EUR 5.6 bn (22.2%).

Commercial property loans: financing for offices totals EUR 6.9 bn

New business in commercial property loans totalling EUR 14.6 bn in the first quarter of 2026 was largely attributable to loans for office properties (EUR 6.9 bn) and retail premises (EUR 4.7 bn). Both property categories experienced double-digit growth rates year on year. While lending for hotels came to EUR 0.6 bn between January and March of this year, loans for industrial buildings totalled EUR 0.2 bn. Loans for other commercially used properties totalled EUR 2.2 bn.

Sideways movement for property finance portfolio

As at 31 March 2026, total property loans granted by the vdp member banks came to EUR 1,040.4 bn. Thus, the property finance portfolio was on par with the previous quarter (31 Dec. 2025: EUR 1,040,3 bn). Properties located in Germany made up by far the greater part of the financing volume, accounting for a share of 85.4%.

Birgit Dietl-Benzin and Jörn Joseph join vdp Board of Directors

At the Members’ Meeting of the Association of German Pfandbrief Banks (vdp) held today in Frankfurt am Main, Gero Bergmann, President of the vdp since 2023 and a Member of the Board of Managing Directors at BayernLB, was re-elected. He therefore remains vdp President for a further two years. He first joined the vdp Board of Directors in 2021.

“The confidence of the member banks means a great deal to me,” Bergmann said after his election, and promised: “I will continue my work as President with untiring energy and a clear vision.” The challenges he highlighted at the beginning of his new term of office included the housing shortage notably in the metropolitan areas, plans to socialize housing in Berlin, and the constant rise in banking regulation. “

As Pfandbrief banks, we will contribute to the debate on issues that affect us in our usual constructive and critical manner. For example, we will go on reminding policymakers and regulators that heightened bank performance can give a boost to Europe’s strength,” Bergmann said.

During this year’s Members’ Meeting, the election of the vdp Board of Directors for a new two-year period was also held. Eleven members were re-elected. Dr Matthias Danne, Deputy Chairman of the Board of Managing Directors at DekaBank, and Thomas Köntgen, Deputy CEO at Deutsche Pfandbriefbank (pbb), did not stand for re-election in light of their upcoming departure from their respective institutions.

Birgit Dietl-Benzin, Member of the Board of Managing Directors at DekaBank, and Jörn Joseph, Member of the Board of Managing Directors at Deutsche Pfandbriefbank (pbb), were newly elected to the vdp’s Board of Directors.

The Board of Directors of the vdp now therefore consists of the following members:

• Gero Bergmann (Präsident)
  BayernLB
• Sabine Barthauer
  DZ HYP
• Birgit Dietl-Benzin
  DekaBank
• Jasper Hanebuth
  NORD/LB
• Holger Horn
  MünchenerHyp
• Jörn Joseph
  Deutsche Pfandbriefbank
• Hans-Dieter Kemler
  Helaba
• Sascha Klaus
  LBBW
• Matthias Schellenberg
  ApoBank
• Carsten Schmitt
  Commerzbank
• Henrietta Six
  Stadtsparkasse Düsseldorf
• Ljubisa Tesić
  UniCredit Bank GmbH
• Christof Winkelmann
  Aareal Bank
• Jens Tolckmitt
  vdp, CEO
  (Member of the Board of Directors qua office)

vdp Property Price Index: Property prices rise at start of 2026

• Increase by 2.2% – effects of Iran war not yet palpable
• New joint property price indices complied by Deutsche Bundesbank and vdpResearch reflected in vdp index effective immediately

The first quarter of 2026 saw property prices in Germany advance by 2.2% compared with the corresponding period one year earlier. This is shown by the property price index of the Association of German Pfandbrief Banks (vdp). As in the previous quarters, residential properties recorded a somewhat stronger increase in prices (2.3%) than offices at 1.9% and retail properties at 1.5%.

“Property prices began 2026 with another moderate tailwind. It remains to be seen how the Iran war will affect the property market – the figures for the first quarter as yet indicate little impact.”
Jens Tolckmitt

Jens Tolckmitt, Chief Executive of the vdp, interpreted the latest developments as follows: “Property prices in Germany began 2026 with another moderate tailwind, thus consolidating the upward trend observed the previous year.” He added that it remains to be seen, however, whether the current trend will continue in the same way as the year progresses. In particular, Tolckmitt commented, the open question is how the Iran war will affect the property market. That said, he remarked that the figures for the first quarter as yet indicate little impact.

Adjusted index methodology
For the first time, the vdp index trend has been calculated in part using an adjusted methodology that the Deutsche Bundesbank and the vdp’s subsidiary, vdpResearch, have developed jointly since 2020. Both organisations today publish, simultaneously, new and extensive indices on commercial property prices in Germany. These new indices are based on the market fluctuation database already in use for regulatory purposes and draw on the extensive transaction database of vdpResearch, which incorporates actual sales reported by more than 700 banks every quarter as well as on the Central Property Market Database of the Sparkassen-Finanzgruppe.

For the Bundesbank’s new commercial property price indices, the price developments for multi-family houses, offices and retail properties are calculated for different regions and aggregated to arrive at a German-wide index. This index shows a 2.1% increase for the first quarter of 2026 compared with the same period a year earlier. In addition, a separate price index is calculated for multi-family houses in the top 7 cities. A retroactive starting point is applied here, namely the first quarter of 2013.

“The new price index reflects fluctuations quickly and accurately, especially those in more volatile commercial markets.”
Reiner Lux

“We are delighted that, after many years of cooperation with the Deutsche Bundesbank, a new commercial property price index has now been created. This index reflects fluctuations quickly and accurately, especially those in the more volatile commercial markets,” Reiner Lux, Managing Director at vdpResearch, explained.

Residential properties: prices for owner-occupied housing rise by 2.5%
The 2.3% rise in residential property prices in the first quarter of this year was primarily driven by growth in prices for owner-occupied housing. Prices for single-family houses and condominiums advanced by 2.5% overall. Multi-family house prices went up by 2.2% between January and March of this year compared with the corresponding period in 2025. This increase was weaker than in previous quarters.

Returns in the rental housing sector as measured by the vdp index for cap rates increased by 0.8% year on year. This was due to the fact that prices for multi-family houses rose less strongly than rents under new leases, which advanced by 3.0% between the first quarter of 2025 and the first quarter of 2026.

“The situation on the housing market remains very tense.”
Jens Tolckmitt

“Even though growth in rents has slowed down somewhat at the moment, the situation on the housing market remains very tense. The ongoing housing shortage continues to drive up prices and rents, notably in the metropolitan areas,” Tolckmitt commented. He called on policymakers to consistently push ahead with the regulatory reforms to stimulate the housing market. This, he said, is considerably more effective and quicker to implement than thoughts on creating a new federal housing corporation – all the more so as the Alliance for Affordable Housing (Bündnis bezahlbarer Wohnraum) and the associations that together make up the Federal Working Group of the Real Estate Industry in Germany (Bundesarbeitsgemeinschaft Immobilienwirtschaft Deutschland, BID) as well as the vdp have long since presented proposals addressing this question. As an example in the field of financing, Tolckmitt mentioned the government guarantees – set forth in the coalition agreement – for loans that are intended to help create new housing on a large scale.

Housing in the top 7 markets*: Growth in rents below nationwide average
In Germany’s top 7 cities in the first quarter of 2026, prices for residential properties grew by an average of 3.6% year on year. Of the seven metropolitan areas, residential property prices climbed most steeply in Hamburg (+4.9%). Growth rates were somewhat lower in Düsseldorf (+4.1%), Frankfurt am Main and Cologne (+4.0% in each case) and Munich (+3.5%). These were followed by Berlin (+2.9%) and Stuttgart (+1.7%).

Rents under new leases in Germany’s top 7 cities rose by an average of 2.4%. This was less than growth for Germany as a whole (+3.0%). Growth rates ranged from +3.9% (Hamburg) to +1.3% (Berlin). Thus, the increase in rents under new leases in the German capital was again – as in the previous quarters – below average. Measured by the vdp cap rate index, returns in the metropolitan areas contracted by 1.3% year on year.

Offices see stronger price increases than retail premises
In the first quarter of 2026, prices for offices and retail properties financed by banks increased year on year. For office properties, prices rose by 1.9% compared with the first quarter of 2025. Retail property prices experienced somewhat lower growth rates of around 1.5%.

Financed office properties also recorded a higher growth rate (2.8%) for rents under new leases than financed retail properties (1.5%) – compared in each case with the corresponding period one year earlier. As a result, returns on offices as measured by the vdp cap rate index were up by 0.8% year on year, while returns on retail premises were stagnant in the reporting period (0.0%), as prices and rents rose in parallel.

All index data on the individual vdp property price indices including raw data are available at both www.pfandbrief.de/vdp-immobilienpreisindex/ and www.vdpresearch.de/leistungen/preisindizes/ .

* The rates of change given here in the section “Housing in the top 7 markets” were calculated using the previous vdp index methodology. They therefore differ from the figures shown by the top 7 index of the Deutsche Bundesbank.

• Main criticism concerns lack of practicability
• Fundamental revision is called for

The Association of German Pfandbrief Banks (vdp) has levelled unequivocal criticism at the European Commission’s drafts for revising the EU Taxonomy. Specifically, the criticism concerns planned adjustments to the delegated acts covering the six environmental objectives set forth in the framework. In the vdp’s view, the drafts fail to meet the aim of increasing the application of the Taxonomy in property financing by financial institutions and of heightening its market acceptance. In particular, the vdp argues that the Taxonomy will continue to lack practicability even after it has been revised.

“Renovation activity will continue to be curbed rather than promoted.”
Sascha Kullig

“The drafts come as a disappointment to the banking sector. They are impractical and are still far too complex,” commented Sascha Kullig, a member of the vdp’s Management Board. As an example, he pointed out that the Taxonomy fails to meet the aim of becoming the steering instrument for the decarbonization of the building stock. “Renovation activity will continue to be curbed rather than promoted. In the financial institutions’ view, the Taxonomy requirements become nothing more than a mere formality in sustainability reporting.”

The vdp has compiled its points of criticism in a response to the consultation launched by the European Commission in mid-March of this year. In its response, the vdp calls for a fundamental revision of the drafts and specifies, among other things, the following shortcomings and petita:

— The exclusion of efficiency gains from energy efficiency measures – e.g. from the instalment of a photovoltaic system – is not practicable. Moreover, the envisaged “Do No Significant Harm” (DNSH) assessment requirements with regard to the protection of water and marine resources, the circular economy and environmental pollution are excessive: they are often out of proportion to the financing volumes involved and do not take the actual data situation into account.

–> The vdp advocates that the DNSH assessment requirements be completely dispensed with in the case of renovation work. Instead, they should be designed as observation criteria. Moreover, conversions to green energy carried out by the energy provider should qualify in exactly the same way as efficiency gains that can be achieved, for example, by installing a photovoltaic system.

— The vdp welcomes that a transition requirement is to be added to the Taxonomy (a building is considered “green” if, among other things, a 60% increase in efficiency within the last 10 years can be demonstrated at the time of purchase or financing). However, this requirement is impossible to apply in practice. For one thing, a 60% reduction is ambitious and often unachievable. For another, banks do not have the historical data needed to make a before-and-after comparison of energy-efficiency renovations. Additionally, a subsequent assessment of efficiency gains contradicts lending practice and is a requirement banks cannot enforce in their dealings with customers.

–> Taxonomy compliance must be given at the time of extending the loan, based on already existing documents (building renovation passport, energy performance certificate). Post-contract reassessments are neither practicable nor marketable.

— The drafts currently state that only the part of the loan for renovation work is Taxonomy-compliant, and not the entire financing of the purchase of the building and the renovation. This rule is incomprehensible and poses an obstacle to a greater volume of Taxonomy-compliant property loans.

–> The vdp calls for the entire loan extended to finance the purchase of the building and the renovation that is often initiated at the same time to become Taxonomy-compliant if the savings targets are met.

— According to the European Commission’s proposals, the energy efficiency requirements for “green” new buildings and newer properties that today already exceed the national threshold for a nearly zero-energy building are to be tightened even further. Specifically, it is envisaged that new construction standards should be brought forward before the Energy Performance of Buildings Directive (EPBD) is transposed into national law. This would impede their applicability.

–> The vdp objects to the plan to bring forward the introduction of new construction standards.

“Unfortunately, the draft in its present form clearly lacks practical relevance.”
Sascha Kullig

“The EU Taxonomy can be effective only if it is applicable in practice,” Kullig pointed out. “Unfortunately, the draft in its present form clearly lacks practical relevance.” The proposed amendments, he argued, make it more difficult for financial institutions to generate a higher volume of Taxonomy-compliant property loans, and thus a higher green asset ratio. To avoid jeopardizing investments in the building stock, the EU needs to define the criteria for classifying green buildings in a more practice-oriented manner, Kullig concluded.

• Increases in residential and commercial property prices
• Growth in new and outstanding Pfandbriefe
• Basel III: vdp calls for targeted adjustments

For member institutions of the Association of German Pfandbrief Banks (vdp), the 2025 financial year was a positive one. Despite a challenging market environment, they succeeded in expanding both new property lending and Pfandbrief sales. This was principally the result of a sustained recovery in property markets, but investor demand for Pfandbriefe also remained buoyant.

“Given the numerous crises and geopolitical conflicts, vdp member institutions successfully navigated the 2025 financial year.”
Gero Bergmann

At the Association’s annual media conference today, vdp President Gero Bergmann stressed that the challenges facing the economy as a whole had increased sharply in recent years, and that this also applied to the financial sector. In light of this, he said that vdp member institutions had successfully navigated the 2025 financial year, benefiting from the positive development of Pfandbrief-related markets. According to Bergmann, the German property market continued the recovery that began in 2024 following the abrupt turnaround in interest rates. Prices, he said, rose steadily – albeit at a substantially lower rate than during the period of very low interest rates. In 2025, the real estate finance business recorded significant growth, Bergmann added, while it was also a good year for the Pfandbrief market: “Both the sales and outstanding circulation of Pfandbriefe increased noticeably.”

Turning to the most recent geopolitical escalation, Bergmann struck a cautious note on the outlook for 2026 as a whole: The war in Iran had not only intensified an already elevated level of uncertainty in the market but was also having a negative impact on inflation and economic growth. “Just as our member institutions weathered the crises of recent years successfully, they are also well equipped to manage the current challenging environment.”

“From today’s perspective, prices are still expected to rise slightly in 2026.”
Gero Bergmann

In his view, how property prices and new property lending develop depends on changes in construction costs and interest rate conditions going forward. “From today’s perspective, prices are still expected to rise slightly in 2026.” The business outlook for Pfandbrief banks remains fundamentally encouraging in the current year, too, he said.

• Trends on the real estate market

Residential property prices approach 2022 peak

2025 saw consistent quarterly increases in German property prices: In the final three months, the vdp’s Property Price Index indicated growth of 4.0 % compared with the same period a year earlier. Once again, the main driver was residential property prices, which rose by 4.2 % nationwide over the course of the year; in the top seven cities, the increase amounted to 4.7 %. In contrast, prices for commercial property, comprising the office and retail segments, grew somewhat less sharply – by an average of 3.5 % across Germany as a whole.

“The price correction in bank-financed office properties was completed in 2025 and prices have since edged up again.”
Gero Bergmann

Bergmann underlined the fact that the upward trend in property prices in Germany that began in 2024 continued last year. “Meanwhile, residential property prices are close to their peak of summer 2022.” Given an ever-growing shortage of housing, he said, further increases in residential property prices and rents are inevitable. An upward trend in commercial property prices is also underway, Bergmann added, although this remained more subdued than in the residential segment. To explain this, he pointed to the much greater dependence of the office and retail property markets on the broader economic environment. “The price correction in bank-financed office properties was completed in 2025 and prices have since edged up again.”

In respect of future developments on the office property market, Bergmann stressed that this would hinge crucially on how the share of employees working from home and the growing use of artificial intelligence (AI) tools affect demand for space. “At present, we expect further differentiation in the office market, with top-tier properties in prime locations and with high energy efficiency continuing to attract rising prices and rents. Older properties in peripheral locations with greater energy consumption will find it increasingly difficult to appeal to buyers and tenants,” Bergmann said. “A uniformly negative view of the office market ignores the strong demand for modern properties in prime locations with excellent energy efficiency.”

Sharp increase in loan commitments

Pfandbrief banks granted significantly more property loans in 2025 than in the previous year, with total mortgage lending rising by 15.7 % to € 148.6 bn. This growth was mainly related to the positive development in residential mortgage lending. While commitments for commercial property loans increased by 12.9 % to € 56.0 bn in 2025, residential property finance increased by 17.5 % to € 92.6 bn. At 79 %, the vast majority of property finance was once again related to properties in Germany.

“The increase in residential property lending is gradually feeding through to the crucial segment of new housing construction.”
Gero Bergmann

Bergmann stressed that nearly all property classes had recorded stronger demand for lending last year. A particularly encouraging sign, he said, was the fact that “the increase in lending for residential properties is not only related to existing buildings but is gradually feeding through to the crucial segment of new housing construction.” The number of building permits had also risen, he noted, and more private households took the decision to purchase residential property. In his view, another positive aspect was that policymakers had launched the first initiatives aimed at deregulating and accelerating housing policy. What matters now, he said, is how quickly these reforms are implemented in practice – and how quickly municipalities, as local decision-makers, embrace these changes.

However, Bergmann emphasised that more measures would be required to deliver a substantial boost to the housing market. “Support for owner-occupier homebuyers and state guarantees for companies building large volumes of new housing have the potential to become genuine game changers.” Bergmann described the idea of a new federal government-owned housing company as misguided. “Instead of creating a new institution that would face the same challenges as private-sector players, the regulatory reforms that have long been discussed to revitalise the housing market should now finally be implemented consistently and swiftly.”

• Current regulatory issues

“The tide is turning on regulation”
The vdp welcomes the fact that calls for less bureaucracy and for simpler or more unified regulation have recently been growing louder in both politics and supervision. “Now that the first corrections have been made, for example in sustainable finance rules, the tide is turning on regulation,” said vdp CEO Jens Tolckmitt. So far, however, its effect has remained limited, he added.

“Regulatory requirements are often excessive, complex and inconsistent in themselves.”
Jens Tolckmitt

In view of the many regulatory requirements, which are often excessive, complex and inconsistent in themselves, he stressed that “banks and borrowers continue to be heavily burdened by overregulation, making loans more expensive.”

Basel III: Freeze in output floor urgently needed in Europe

While Europe continues to pursue a strict implementation of the Basel III rules, the United States is relaxing its banking regulation in a deliberate break from the Basel III framework. According to the US Federal Reserve’s (Fed) published implementation proposal, lower capital requirements and less complex rules are intended to strengthen lending and support economic growth in the United States. The Fed’s proposed capital relief ranges from around 5 % to just under 8 %, depending on the size of the institution. “The United States is therefore effectively abandoning the goal that European supervisors, in particular, have consistently championed: a uniform, global regulatory standard. Instead, the US is now prioritising the competitiveness and performance of its banks in the interests of its economy,” Tolckmitt stressed.

He added that other jurisdictions, including the UK and Canada, were also diverging from the Basel III framework. In light of this, Europe’s insistence on maintaining the capital requirements is difficult to understand, he said. “Political leaders and supervisors have repeatedly underlined the resilience of the banking system and the solid capitalisation and liquidity of European banks,” Tolckmitt said. He pointed out that, despite this, Basel III threatens to impose significant additional capital burdens of up to 20 % by 2032 – and even more in individual cases. Remarkably, Tolckmitt said, this would especially impact lower-risk business areas.

“The output floor must be frozen at its original level of 50 %.”
Jens Tolckmitt

In his speech, Tolckmitt was clear about what needs to change: “Pfandbrief banks are not calling for a fundamental departure from Basel III, but for targeted adjustments.” A continued increase in capital requirements over a further six years, as currently envisaged, would be counterproductive, he said. Of particular concern to the vdp is the floor for banks’ capital requirements: “The output floor must be frozen at its original level of 50 % to prevent further unwarranted capital burdens.” In addition, Pfandbrief banks are calling for demonstrably low-risk residential mortgage loans to retain their preferential treatment on a permanent basis, and for project development financing – known as acquisition, development and construction (ADC) financing – such as funding for new housing construction and energy-efficient refurbishments, not to be subject to prohibitively high risk weights.

These targeted adjustments to the Basel III framework would enhance banks’ capacity to provide finance and, in this way, facilitate urgently needed investment in housing, climate action and infrastructure, Tolckmitt noted. He called for a more pragmatic approach to regulation along US lines – one that is commensurate with the facts and the risks involved, while also taking banks’ operational capacity into consideration. Otherwise, he said, even more business now handled by banks could move into less regulated sectors – a trend that supervisors themselves are increasingly recognising and viewing with concern after 17 years of one-sided, continuous regulation.

Sustainable finance regulation: Practical implementation remains inadequate

Pfandbrief banks acknowledge that the European Commission has followed up its announcement that it intended to streamline European sustainable finance regulation with concrete action. The simplification of disclosure requirements agreed by Brussels was an important first step, Tolckmitt acknowledged. However, inconsistencies between the reporting obligations of companies in the real economy and banking regulations are leading to gaps in data provision, he said. Tolckmitt stressed that the criteria for classifying “green” buildings need to be made much more workable in practice so as not to obstruct investment, particularly in the existing building stock.

“The taxonomy criteria must become much more workable in practice.”
Jens Tolckmitt

Commenting on the recent consultation on the EU taxonomy, he said the objective of promoting broader use and greater market acceptance of the framework in property finance had still not been met. Among the reasons for this, he cited the taxonomy’s failure to take account of data availability and banks’ lending processes.

He called for targeted adjustments to the criteria: “The taxonomy criteria must become much more workable in practice.” One key requirement, he said, was to maintain the 2030 deadline for implementation of new-build standards laid down in the Energy Performance of Buildings Directive (EPBD) rather than bringing it forward to 2027. He argued that regulatory and audit requirements should be aligned more closely with the principles of materiality and proportionality. For Pfandbrief banks, another decisive issue is that taxonomy assessments should be possible as a one-time review when the loan is granted, on the basis of the documents available at that point, such as the energy performance certificate or renovation passport.

• Developments on the Pfandbrief market

Total Pfandbrief circulation rises to € 410.9 bn

In 2025, the Pfandbrief market once again proved resilient and served as a stable funding source for vdp member institutions throughout the year. Total Pfandbrief circulation increased in 2025 by € 11.4 bn, or 2.9 %, to € 410.9 bn; that of mortgage Pfandbriefe rose above the € 300 bn mark for the first time (€ 304.1 bn versus € 298.4 bn in 2024). Total public Pfandbriefe in circulation also increased, growing by 5.6 % to € 106.8 bn.

Pfandbrief sales grew in 2025 from € 57.3 bn to € 66.8 bn – an increase of 16.6 %. This growth was driven by both mortgage and public Pfandbriefe, sales of which increased by 10.1 % and 35.1 %, respectively. With a volume of € 31.0 bn, issuance of benchmark Pfandbriefe – with volumes of at least € 500 m – reached its third-best level of the past 10 years, Bergmann said.

Sustainable issues: Shortage of eligible cover pool assets

Developments in the sustainable Pfandbrief segment were mixed. While total sales fell from € 7.1 bn to € 4.7 bn, overall circulation rose from € 30.5 bn to € 33.0 bn. Interest among vdp member institutions in issuing sustainable Pfandbriefe remained strong, Bergmann noted. However, he added that there was a shortage of cover pool assets that meet the high standards required for the issuance of Green and Social Pfandbriefe.

“By raising the loan-to-value limit to 80 %, the Pfandbrief could play an even greater role in supporting housing construction and home ownership.”
Gero Bergmann

Bergmann underscored the Association’s view that “the Pfandbrief continues to demonstrate its traditional crisis resilience.” The product had once again underlined its role as an anchor of stability for Pfandbrief banks and for property finance, he said. He concluded his speech by announcing that, in the forthcoming amendment to the Pfandbrief Act, the vdp would advocate raising the loan-to-value limit for residential mortgage loans to 80 % – as has long been the case in many other European countries. This would enable the Pfandbrief to play an even greater role in supporting housing construction and home ownership, he stressed. “Our wider aim with the amendment is to make the Pfandbrief even safer and more attractive, to strengthen the competitiveness of German issuers and, at the same time, to improve its potential for housing finance.”

Finally, Bergmann noted that he was satisfied with developments in the Pfandbrief market at the start of 2026, even though it had not matched the previous year’s strong performance. At € 20.8 bn, Pfandbrief sales by vdp member institutions in the first three months of the year was 11 % below the volume recorded in the exceptionally robust period a year earlier.

• vdp membership development

 The vdp maintains a total of 52 member institutions, which together account for a market share of almost 96 % of all Pfandbriefe in circulation. An overview of all member institutions can be found here: https://www.pfandbrief.de/site/de/vdp/verband/mitgliedschaft/mitglieder.html

Lending volume of vdp member institutions rose 15.7 % in 2025

At € 148.6 billion, the institutions affiliated with the Association of German Pfandbrief Banks (vdp) extended a significantly higher volume of property loans in 2025 than in the previous year. The increase amounted to 15.7 % (2024: € 128.4 billion), with quarterly volumes ranging from € 36.3 billion to € 38.2 billion. New lending was evenly distributed throughout the year, with the highest level recorded in the final quarter.

As in previous years, residential property loans once again dominated real estate finance in 2025. Lending for residential properties reached a volume of € 92.6 billion – an increase of 17.5 % compared with the previous year’s figure (2024: € 78.8 billion).

The volume of new commercial property loans totalled € 56.0 billion across all four quarters – up 12.9 % on 2024. Starting from a low base, new lending recovered slightly in the reporting year but remained well below the long-term average in light of structural changes in the commercial real estate market and the broader economic environment.

“In 2025, Pfandbrief banks recorded an increase in real estate lending across nearly all property types.”
Jens Tolckmitt

“In light of the economic and geopolitical environment, the Pfandbrief banks are satisfied with the performance of their property lending business in 2025,” said Jens Tolckmitt, noting that the volume of new lending increased across almost all property classes. Demand for lending in the residential property segment rose both for the purchase of existing properties and for new residential construction – in line with figures recently published by the German Federal Statistical Office showing a modest increase in building permits, Tolckmitt added.

Residential mortgage finance: One- and two-family houses led the way

In 2025, new residential mortgage lending of € 44.2 billion was once again dominated by loans for one- and two-family houses, which accounted for just under 48 % of the total volume in the residential segment (€ 92.6 billion). They were followed by loans for multi-family houses and condominiums, with volumes of € 22.8 billion and € 20.7 billion, respectively. At 27.4 %, loans for multi-family houses recorded the strongest growth in the year under review. One- and two-family houses and condominiums posted growth rates of 16.3 % and 15.6 %, respectively.

Commercial real estate finance: Offices accounted for over half of lending

At € 28.8 billion, loans for office properties accounted for more than half of all new commercial real estate business in 2025 (€ 56.0 billion). As in previous years, new lending for retail and hotel properties lagged significantly behind, with volumes of € 13.5 billion and € 4.5 billion, respectively. Lending for industrial buildings amounted to € 1.2 billion in the reporting year, while loans for other commercially used properties came to € 8.0 billion.

Portfolio of property loans remained broadly stable

As of 31 December 2025, the portfolio of property loans extended by vdp member institutions amounted to € 1,040.3 billion. Consequently, total property financing was roughly in line with the previous year’s level (31 December 2024: € 1,042.1 billion). However, developments varied across segments: while residential property lending increased by 1.3 %, commercial property lending declined by 3.8 %. At 85.3 %, the overwhelming majority of lending continued to be attributable to properties in Germany.

vdp index records price increases in all four quarters

Property prices in Germany have been on the rise for two years. After 1.8% growth in 2024, prices were up by 4.0% in 2025. This is shown by the property price index of the Association of German Pfandbrief Banks (vdp), which climbed to 185.6 points as at end-2025. Price increases were recorded in all four quarters of 2025, most recently by 1.0% from the third to the fourth quarter.

The figures used to calculate the vdp index have been collected by vdpResearch every quarter since 2010. They track price developments on the entire German market for residential, office and retail properties and – unlike other price indices – are based on an analysis of actual property transaction data from more than 700 credit institutions.

The rise in the index was again driven more strongly by growth in residential property prices than in commercial property prices. Compared with the closing quarter of 2024, prices for residential properties advanced by 4.2% while commercial property prices, which comprise office and retail property prices, increased by 3.5% in the same period. Compared with the third quarter of 2025, residential and commercial property prices experienced similar growth rates (+1.0% and +0.9% respectively).

“The recovery phase in the property market continued in 2025 – prices are rising steadily, but considerably less strongly than in the low interest rate phase.”
Jens Tolckmitt

“The recovery phase in the German property market continued in 2025 following the abrupt turnaround in interest rates. Prices are rising steadily, but considerably less strongly than in the low interest rate phase,” vdp Chief Executive Jens Tolckmitt pointed out. He went on to say that, given the ongoing housing shortage, residential property prices can be expected to rise further in the current year. He added that the trend in commercial property prices, by contrast, is harder to predict. “Economc developments and geopolitics remain relevant uncertainty factors,” Tolckmitt remarked.

Residential properties: Multi-family house prices up by 5.3%

As in previous quarters, the 4.2% increase in residential property prices in Germany was driven by rising prices for multi-family houses, which were up by 5.3% year on year. Growth in prices for owner-occupied housing, which include single-family houses and condominiums, was markedly lower at +3.0%.

The ongoing housing shortage was reflected, moreover, in further increases in rents under new contracts for multi-family houses in the fourth quarter of 2025. Compared with the closing quarter of 2024, they rose by 3.5%. As rent growth was unable to keep pace with the rise in prices for multi-family houses, however, returns as measured by the vdp index for cap rates contracted by 1.7% year on year.

“Government guarantees could stimulate the creation of additional housing.”
Jens Tolckmitt

“One of the political priorities of 2026 must be to create housing at affordable prices,” Tolckmitt emphasized, adding that many good ideas are already on the table from the work done by the Alliance for Affordable Housing (Bündnis bezahlbarer Wohnraum) during the last legislative period. He pointed out that the new federal government has also provided a targeted impetus with its so-called “Bau-Turbo” initiative to speed up housing construction, although the local authorities still need to give life to the initiative and supplement it with further measures. In this context, Tolckmitt again called for the introduction of government guarantees for the financing of new housing construction in order to stimulate the creation of additional living space and remedy the ongoing situation whereby financing is chiefly provided for existing buildings. In this way, he explained, loan costs could be reduced significantly, thus making new construction economically attractive again. “In view of the historically extremely low default rates in residential property financing and the considerable excess demand in the housing market, the risk that the government would be required to pay up under such an instrument would be low, while the impact on the supply of housing would be substantial if this measure were designed appropriately,” Tolckmitt stressed.

Housing in the top 7 markets: Frankfurt sees strongest price growth

In the fourth quarter of 2025, growth in prices for residential properties in Germany’s top 7 cities was even somewhat stronger than in the country as a whole. Prices for residential properties in Berlin, Cologne, Düsseldorf, Frankfurt am Main, Hamburg, Munich and Stuttgart rose on average by 4.7% compared with the closing quarter of 2024. Whereas Stuttgart, the capital of Baden-Württemberg, recorded the lowest increase (+2.2%), the highest growth rate (5.7%) was found in Frankfurt am Main in the quarter under review.

The increase in rents under new contract in the top 7 cities averaged 3.5%, matching exactly the trend across Germany as a whole. Growth rates in the seven metropolitan areas ranged from +2.0% (Stuttgart) to +5.0% (Frankfurt am Main). Measured by the vdp cap rate index, returns in the metropolitan areas fell by 1.4% on average in the fourth quarter of 2025 compared with the corresponding quarter one year before.

Commercial properties: Office properties see higher growth rates

Prices for commercial properties financed by banks rose by 3.5% year on year and 0.9% quarter on quarter, and were mainly driven by growth in office prices. Office properties increased in price by 3.9% compared with the fourth quarter of 2024 and by 1.1% compared with the immediately preceding quarter. Prices for retail properties saw lower growth rates of 2.3% and 0.6% respectively.

Compared with the fourth quarter of 2024, financed office properties also showed higher growth rates (+3.3%) than retail properties (+1.8%) with regard to rents under new contracts. By contrast, the trend in returns as measured by the vdp cap rate index was quite similar. Offices recorded a drop in returns of 0.6% while the decline for retail properties was calculated at 0.5%.

Outlook: “Economic stimulus and regulation with a sense of proportion are needed”

“Germany’s housing market is in need of stimulus. Besides scaling back building standards in a targeted manner and quickly implementing the ‘Bau-Turbo’ initiative, a resolute economic-policy stimulus as well as banking regulation with a sense of proportion would be important measures,” Tolckmitt emphasized. In addition, he called for the removal of obstacles to home ownership, as this could substantially reduce the pressure on the rental housing market. Specifically, Tolckmitt proposed lowering ancillary purchase costs, arguing that they are particularly high in Germany.

Private enterprises will have to invest many billions in the climate-neutral transition of the economy by 2045. And yet, a study by researchers at the German Economic Institute (IW) warns: The capital adequacy limits imposed on banks put the financing at risk.

Based on the rules in place at present, to secure the additional credit needed for the climate-neutral transition of the economy, European banks would have to build up additional capital totalling EUR 867 billion by 2045. This is equivalent to an increase of around 44%, according to an IW study commissioned by the Association of German Pfandbrief Banks (vdp). The study points out that if equity capital were to remain at the present level, the capital ratio of 19.3% in 2024 would drop to 13.5% in 2045.

Enormous investments needed in the building sector

The context here are the enormous investment amounts that will be required in the coming years. The IW estimates amounts of around EUR 819 billion per year for industry, transport and energy. In the building sector alone, additional investments will be needed of EUR 435 billion per year until 2045, for instance for energy-efficient renovations and new housing construction. The greater part of this will be financed through loans. The banks would then have to increase their risk-weighted assets in this area alone by EUR 214 billion per year.

Banking regulation is exacerbating the situation further. The implementation of the European banking package will make additional capital necessary of between EUR 129 billion and EUR 135 billion. These additional requirements are supposed to strengthen the resilience of the financial system. However, policymakers and supervisors themselves acknowledge that the European banks are today already stable.

EU must find the right balance

“The EU faces a balancing act,” Markus Demary, a financial market expert at the IW, commented with regard to the findings. He went on to say that, basically, the stringent capital adequacy rules proved their worth during the crises of past years, and that the banks are well capitalised. “If the decarbonization of the economy is not to fail, reforms are nevertheless necessary,” Demary remarked. Borrowers are already turning increasingly to alternative finance providers in the non-banking sector. These providers are less well regulated, which heightens the risk to financial stability. Possible measures might be, for example, to review individual capital buffers, to dispense with stricter elements of the Basel III implementation or to cut red tape in sustainability regulation.

• Good investor demand expected to continue

The vdp member banks perceive a positive sentiment on the market for Pfandbriefe and unsecured bank bonds. This is the finding of the seventh vdp Issuance Climate survey. For the first time since the survey was launched in December 2022, clearly positive values have been calculated for all three scores.

Whereas the score for unsecured bank bonds has improved from +5 to +22 since the last survey, published in June 2025, the score for Pfandbriefe has advanced into positive territory for the first time (+14 compared with -1 in June 2025). These two developments have led to an overall score of +17, which is also the highest to date.

The vdp Issuance Climate survey is conducted and published twice a year. The sentiment indicator ranges from -100 to +100 points.

Strong demand for Pfandbriefe in 2025

During the first 11 months of this year, the vdp member banks issued new Pfandbriefe worth a total of EUR 61,2 billion. That was 22% up on the corresponding period one year earlier. New public Pfandbriefe issued during the same period were reported at EUR 21.4 billion, representing an increase of 73%. New mortgage Pfandbriefe were placed with a total volume of EUR 39.8 billion between January and November 2025, meaning an increase of 7%. Benchmark-format Pfandbriefe (> EUR 500 million) accounted for a volume of EUR 31.4 billion compared with EUR 29.9 billion in the corresponding period one year earlier.

Given that residential property financing business is long-term oriented, it is of considerable importance that it was possible to successfully place Pfandbriefe across the full maturity spectrum during the course of 2025. Around one third of all benchmark issues have maturities of at least seven years.

“The good demand for longer-dated Pfandbriefe supports the maturity-matching refinancing of long-term residential property financing,” Sascha Kullig, Management Board member at vdp, commented.

Determinants of demand in 2026

Whereas current investor demand for Pfandbriefe scored 78 points in the latest survey, the experts at the vdp member banks were considerably more cautious in how they assessed the coming six months, awarding a value of 22 points. Among the determinants of the development of investor demand for Pfandbriefe in the next six months, the asset-swap spread level (-20 points) and the yield pick-up over Bunds (-19 points) were viewed as being rather negative for the reason that both factors detract from the relative attractiveness of Pfandbriefe. German Pfandbriefe have narrowed vis-à-vis asset swaps by around 20 basis points during the course of this year. By contrast, the maturities (+27 points), the asset business to be refinanced (+38 points) and the expected oversubscription level (+49 points) were named as positive factors.

Unsecured bank bonds in high demand

The segment comprising unsecured bank bonds likewise presented an upbeat picture. Current investor demand received a score of +72 points, compared with +43 points for the last six months. The surveyed experts took a noticeably more sceptical view of the coming six months, awarding a score of 0. “One reason for this assessment is likely to have been the narrowing of the spreads associated with the very strong demand, which could lessen the relative attractiveness for investors and so dampen demand. On the whole, however, the strong demand for the unsecured bank bonds issued by our member banks is a reflection of our investors’ confidence in the resilience of the banks given their good earnings situation and good to very good capital adequacy levels,” Kullig pointed out.

Suggestions to improve the usability of the Climate Delegated Act

In a joint white paper, the Association of German Pfandbrief Banks (vdp) and the Energy Efficient Mortgages Hub Netherlands (EEM NL Hub) call for a pragmatic revision of the rules pertaining to real estate in the EU Taxonomy Climate Delegated Act. Both organisations support maintaining climate change mitigation as environmental objective, yet at the same time propose a more practice-oriented section of the EU Taxonomy in respect of the criteria relating to Construction and Real Estate. They propose seven adjustments that would simplify the criteria of the Climate Delegated Act, align them with national energy efficiency and building requirements, and so make it easier to designate the financing of energy efficient buildings, building renovations and new constructions throughout Europe as sustainable.

“Ambitious climate targets can only be met by ensuring practical applicability,” Sabrina Miehs, Head of Sustainable Finance at the vdp, pointed out. “To be able to channel capital flows into sustainable projects, the regulatory framework for credit institutions, investors and customers needs to be comprehensible and implementable.”

“This joint initiative sees itself as a constructive contribution to the on-going review of the EU Taxonomy. Far from being a step backwards, simplified and clearer rules, that consider data availability and data governance considerations, are a prerequisite for achieving the climate ambitions of the EU Taxonomy,” Vincent Mahieu, one of the founders of the EEM NL Hub, emphasised.

Practical implementation, not regulatory overload

The white paper is based on experience gathered by leading credit institutions from Germany and the Netherlands that together represent around one third of the European mortgage market. As the white paper demonstrates, the current technical criteria of the EU Taxonomy are often difficult to apply to real estate finance in practice. They give rise to uncertainty and impose disproportionate demands, since many provisions are not embedded in national legislation and cannot be demonstrated for individual properties. This makes it particularly challenging to develop financial products aligned with EU Taxonomy for homeowners.

The seven concrete proposals put forward by the vdp and EEM NL Hub are as follows:

1: Align Taxonomy criteria with national EPBD implementation requirements

Observation:

The Climate Delegated Act provides for more stringent energy efficiency values than national standards as implemented under the Energy Performance Buildings Directive (EPBD). The result is legal uncertainty, double regulation and a lack of practicality.

Solution:

The national implementations of the EPBD ought to suffice for EU Taxonomy compliance. An additional tightening by 10% should only be anchored as an option.

2: Update renovation criteria to promote renovation of buildings

Observation:

Even if the Taxonomy criteria for renovation are met in their entirety but the building (unit) does not achieve a high energy-efficiency level after renovation, only a fraction of the loan and not the entire financing of the building (unit) can be classified as EU Taxonomy-aligned. This provides a clear incentive to prioritise buildings that are already relatively energy efficient and only need a small improvement to become EU Taxonomy-aligned.

Solution:

Criteria are needed that promote the renovation of buildings that are currently classified as inefficient (energy classes D-G) and where a renovation might not immediately result in the highest energy class. Under the defined requirements for energy-efficient renovations, the entire property financing should be recognised as EU Taxonomy-compliant for the economic activity “renovation of existing buildings” if certain conditions are met.

3: Simplify renovation criteria, make them more (finance) user-friendly

Observation:

The current requirements under the EU Taxonomy for renovation activities are too technocratic and difficult to verify. Moreover, they prevent certain renovation measures. Loans must be split into different parts so that at least partial amounts can be recognised as EU Taxonomy-aligned.

Solution:

Clear and measurable criteria should be introduced (for example, by way of one of the following requirements: improvement by at least two energy label classes, a reduction of 30% primary energy demand without the need to disregard renewables, or several elements as recommended in a renovation passport). Regarding financing, EU Taxonomy conformity should not apply only to partial amounts, but to the entire renovation loan.

4: Streamline the DNSH criteria to allow for a flexible approach

Observation:

The “do no significant harm” (DNSH) criteria, which are intended to ensure that economic activities do not significantly harm any of the six EU environmental objectives, are excessively complex and out of proportion, especially for small renovation loans. Moreover, in many cases it is impossible to verify or demonstrate compliance on individual economic activity level.

Solution:

Introduce the option to report on the DNSH criteria as observation criteria but not as a requirement for EU Taxonomy-alignment. Only the climate risk assessment could be considered to remain mandatory provided the criteria are easily verifiable in practice.

5: Improve guidance and transparency of regulatory process to avoid uncertainty

Observation:

Frequent and contradictory communications from the European Commission give rise to confusion, room for interpretation and legal uncertainty.

Solution:

It would seem appropriate to introduce a formal consultation procedure with fixed deadlines, public participation by relevant stakeholders, and a clear-cut demarcation of responsibilities.

6: Adress data availability and GDPR barriers to allow financial institutions to use property-level data

Observation:

The lack of widespread data availability and lack of clarity and consistency in data protection rules prevents the use of energy- and building-related data. This renders ESG reporting more difficult and reduces transparency but even more importantly, prevents market actors from collecting property related information to create tailored advice to consumers and develop innovative customer propositions.

Solution:

A legal basis is needed that enables credit institutions (and other market actors) to access and use property-level data both for reporting and customer advisory purposes. The General Data Protection Regulation (GDPR) Article 6 (c),(e),(f) ought to apply as a permissive rule regarding sustainability and climate adaptation data.

7: Clarify the application of minimum safeguards to ensure proportionality

Observation:

No differentiation is made between the minimum safeguards for residential and commercial property loans. This results in pointless verification duties and needless bureaucracy. Social standards are regulated at the national level in any case.

Solution:

Mortgage loans to private individuals and SMEs ought to be exempted from minimum safeguard checks. With regard to loans for commercial properties, compliance should be assumed as long as there are no violations.