Residential Real Estate Financing in Germany - Success Factors in the Competitive Arena

Dr. Louis Hagen and Dr. Benno-Eide Siebs

In Germany, residential loans are currently booming. Investors, owner-occupants and real estate financiers are increasingly attracted to homes and condominiums. This interest was triggered by the financial market crisis, the repercussions of which can still to be felt today. Hence, the European sovereign debt crisis, discussions on the future of the Euro, concerns over a continued rise in inflation and lower mortgage interest rates increased the attractiveness of German residential properties. After all, contrary to many nations in Europe and across the world, Germany emerged from the financial crisis with its residential property market largely unaffected. Once more, this trend has re-tipped the balance in real estate finance. In 2007, residential loans accounted for less than 30 percent of the entire real estate volume funded by German Pfandbrief Banks. In 2010, this ratio had returned to 43 percent. Since the risk involved is comparatively moderate, residential property finance was back on the banks business strategy radar.
The present article examines the requisite skills for long-term success in Germany’s residential property loan market.