Residential Property Finance
Pfandbrief banks traditionally rank among the major providers of capital for residential and commercial construction. With a market share of around 40 percent of new residential real estate financing business, they are one of the most important providers of such loans in Germany.
Development of residential real estate financing in Germany 2021
Following the outbreak of the COVID 19 pandemic, the residential market proved extremely resilient to the crisis and residential real estate in both the tenant and buyer markets continued in high demand. This led to a steady increase in residential real estate sales.
In 2021, total residential real estate purchases reached some EUR 240 billion, an increase of more than 10% year-on-year. Both, owner-occupied homes and apartments, which represent the most important asset class for private households, and multi-family houses contributed to this new record. Institutional investors alone acquired residential property worth around €29 billion (excluding the acquisition of Deutsche Wohnen by Vonovia), which meant that residential real estate was once again the strongest asset class.
At the same time, prices for residential real estate increased at an above-average rate of 10.3% compared with 2020. Owner-occupied housing became 11.3% more expensive, while prices for multi-family houses rose by 9.4%. In this context, yield compression intensified further. Rents for new contracts increased by 3.2%.
New residential real estate financing business also developed positively in 2021. Overall, loan disbursements totalled around EUR 300 billion. Compared with the previous year, this represents an increase of around 11.4%.1)
New residential real estate financing business in Germany 2005 - 2021
Development of residential real estate financing by vdp member institutions
The vdp member institutions made new residential real estate loan commitments of €118.5 billion in 2021, an increase of 11.3% year on year.
At €61.1 billion, more than half of the loan commitments related to the financing of single- and two-family homes. Compared with the previous year, this segment recorded an increase of 8.5%.
The unabated high demand for condominiums was reflected in an above-average increase in loan commitments, which at EUR 26.6 billion in 2021 were 19% higher than only a year earlier.
Commitments for multi-family houses also increased sharply again year-on-year, by +7%. At 26.9 billion, the second-largest residential segment among the vdp member institutions was only just ahead of the condominium segment.
At 97%, domestic business accounted for the lion's share of loan commitments. Here, at a total of €115 billion, 11% more loans were committed than in the previous year. Cross-border business recorded similar growth resulting in a EUR 3.3 billion was committed last year for the purchase of residential real estate abroad.
Extensive data material on this subject is available for download in our statistics section.
1) The quantification of residential real estate financing business is based on the domestic business of banks and savings banks as well as life insurers. The calculation is based on data provided by vdp member institutions and various associations of the banking and insurance industry. Significant parts of the banking industry, namely cooperative banks, public sector agencies and a large proportion of regional and other credit banks, do not provide such information. This data gap was closed by means of an extrapolation based on available data on other groups of institutions and on the basis of Deutsche Bundesbank loan portfolio statistics.