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Lending business of the Pfandbrief banks

Residential Property Finance

The demand for residential property remained high in 2013, in view of the robust labour market and the fact that financing terms continued to be favourable. This is also reflected in a considerable rise in loans granted. In total, new residential property financing came to € 48.2 billion, 8.0 % higher than in the previous year. As a result of the high level of demand for residential property, particularly in urban areas, new financing business for owner-occupied apartments grew by 7.8 %. In contrast, financing for single and two-family homes grew by only a small amount (2.2 %). The fact that institutional investors are increasingly focusing on urban residential property markets was also reflected in the level of new loans granted by Pfandbrief Banks, with new loans for multi-family houses increasing by 17.9 %. Financing for existing properties (including loans for renovations and upgrades) accounted for 58 % of new loans. Loans for new construction and refinancing of loans from other lenders each accounted for 21 % of new business.
Despite subdued economic growth – real GDP increased by only 0.4 % in 2013 – circumstances were still favourable to the demand for residential property financing. The labour market, and hence the outlook for household income, remained broadly stable. The situation was also helped by the ongoing exceptional financing terms. Fixed interest rates (five to ten years) for residential construction loans ranged from 2.7 % to 2.9% during the year under review.



For a number of years demand for residential property, particularly in Germany’s large cities, has been rising sharply, while levels of construction, though increasing, have remained quite low from a long-term perspective. Low interest rates and the absence of alternative investment opportunities have resulted in a spike in demand. Although residential property prices have risen considerably in recent years, the amount of debt held by those acquiring residential property is at a historically low level, thanks to the favourable terms available for financing. As long as the labour market, and hence household incomes, remains stable, we anticipate that demand for residential property in large cities will remain steady in 2014.

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