Dhe momentum on the residential real estate market has recently slowed considerably in view of the changed framework conditions. This was pointed out by Jens Tolckmitt, General Manager of the Association of German Pfandbrief Banks (VDP), on Wednesday. The most important real estate financiers in Germany have come together in the association. Tolckmitt names the higher ones Interest charges as the main reason for the greater caution: “On the demand side, the higher financing costs have stopped the activities of numerous institutional investors, so that no noticeable upturn in transaction activity is to be expected for the second half of 2022.” that the purchase is becoming increasingly difficult, especially for emerging households at the current price level.
Against the background of the development so far in the current year, the VDP expects a slight decline in new financing business in 2022 compared to the previous year for the first time since 2009. On the commercial real estate market, which reacts more quickly to economic changes than the housing market, the overall mood is subdued. According to Tolckmitt, construction projects and investment decisions are currently being put to the test on the office real estate market, so that no increase in the letting and transaction volume is to be expected in the second half of 2022. Stationary retail is being burdened by consumers’ reluctance to spend.
The current framework conditions would have a dampening effect on lending for office and retail properties. The logistics area, which is developing comparatively dynamically, is too small to compensate for declines in other segments. “Since no significant impetus is expected for new construction projects and on the investment market for the further course of 2022, a downward trend in terms of new lending in the commercial real estate sector is to be expected for 2022 compared to the previous year,” said Tolckmitt.
The disbursement volume for residential real estate financing in Germany amounted to 278.6 billion euros in 2021. This corresponds to an increase of 11.4 percent compared to the previous year, according to calculations carried out by the VDP based on information from the credit and insurance industry associations and the Deutsche Bundesbank. The development of residential real estate financing thus almost corresponded to the growth in the construction and transaction volume (plus 11.9 percent compared to 2020 to 521.9 billion euros).
According to the association, 140 billion euros were spent in the first six months of 2022 to finance residential real estate promised, which corresponds to an increase of 3 percent compared to the same period of the previous year. Compared to the development in the two previous years, which showed growth rates of 10 and 11 percent respectively despite the COVID 19 pandemic, the momentum – especially in the second quarter of 2022 – has decreased significantly. In addition to the increased interest rates, the VDP points to the economic uncertainties caused by the Ukraine war, the massive increase in energy prices and inflation for this development.