Development of residential and commercial property financing in Germany

Thomas Hofer, vdpResearch

The real estate market in Germany is experiencing an expansion phase that has lasted almost ten years now. Construction investment and transaction volumes in the market for existing properties have increased continuously since 2010. This is also a reflection of the price growth observed in recent years. As real estate investments are financed to a large extent through borrowed funds, the rise in construction investment has also led to an increase in bank lending.

The share of the construction and transaction volumes financed through borrowed funds has remained largely stable. Over the past decade, the average share of borrowed funds came to around 50 percent for all real estate investments and transactions. It should be kept in mind that the role played by the different property market segments in this context is subject to change over time, and that they require different shares of borrowed funds. For instance, investments in existing buildings today play a greater role in relation to new construction than was the case 25 years ago.