Residential Property Finance

The Pfandbrief banks are important providers of residential and commercial property finance. They are holding substantial market shares in their core business fields: 33 percent of residential property finance and 60% of commercial property loans are granted by the vdp member banks.

Low interest rates and the absence of alternative investment opportunities have resulted in a spike in demand at the residential property market, although prices have risen considerably in recent years. Particularly in metropolitan regions and attractive university towns, the market for existing properties cannot at present satisfy the demand. But building permits and construction backlogs point to growth in new construction activity. However, the long production times typical for the construction sector and high capacity utilization levels will only ease this market situation with a time lag. For this reason, a dampening effect on price dynamics is likely to unfold only gradually.

Despite the dynamic growth of housing prices the economic growth as well as developments in incomes, employment, interest rates and consumer prices are important factors behind the current boom in the German real estate market. The situation was also helped by the favorable financing terms. Fixed interest rates (five to ten years) for residential construction loans ranged from 1,59 to 1.71 percent during 2017.

The good constitution of the German real estate market is also reflected in the lending business of the vdp members. In total, new residential property financing came to EUR 74,2 billion 2017, 0,5 percent more than in the previous year. 

Residential property finance 2017, committments vdp-members

Source: vdp