Real estate markets

Lending growth in the Eurozone remains weak

Last year, banks‘ loans to companies, private households and governments grew in the Eurozone by 0.9 percent to EUR 10,774bn. Private loans for house purchases, which rose by 2.4 percent, accounted once again for the highest growth contribution. In the segment of loans to corporate clients, the long years of contracting loan volumes came to a halt, with corporate loans climbing in 2016 by 0.6 percent. In contrast, the volume of loans to regional and local authorities has further declined. All in all, the renewed growth in customer loans that was already evident in 2015 has stabilised, but there are still no visible signs of accelerating momentum on the European credit market.  Furthermore, great differences could be noted in developments between individual national markets: the Europe-wide growth was driven almost entirely by banks in France and Germany which recorded above-average gains in their respective loan volumes. In contrast, banks‘ lendings…

Growth in credit markets in Germany expected to accelerate

Last year, the surge in growth in Germany’s credit markets seen from the end of 2015 onwards stabilised and intensified. Corporate and private households’ bank debts rose 2.7 percent to EUR 2,372.3 billion. In other words, the usually sluggish trend of past years was at long last overcome. Private property financing was again the growth driver. With stronger new building activity and increasing demand, as well as rising prices in the property markets, the need for credit grew appreciably. Demand was also buttressed by extremely favourable financing terms. The only thing preventing even more buoyant growth was the translation of the EU Mortgage Credit Directive into German law, which led to stricter regulations for loan approvals above all for senior citizens and young families. The trend for corporate credit was also gratifying: From 2013 to 2015 this market segment saw only weak, indeed usually negative change rates. However, in 2016…

German property market: The strong price surge in 2016 weakened in the fourth quarter

The property price index that has just been released for Q4 2016 by the Association of German Pfandbriefbanken (Verband deutscher Pfandbriefbanken) proves in black and white what had already started to become clear in the course of the year: With an increase of exactly 6 percent, last year posted the strongest price rise for owner-occupied homes since the index was first launched in 2003. The upturn was slightly weaker for prices in detached and semi-detached houses, at 5.8 percent, while that for owner-occupied flats was a little greater at 6.5 percent. The pronounced increase not only shows that the price trend picked up pace quite significantly, in the wake of an increase of 4.5 percent in 2015 and of a good 3 percent in each of the four prior years. But also that, buttressed by a low rate of inflation of not even half a percent, the real price of…

International real estate markets: low interest rates drive prices and risks of a correction higher

The international real estate markets have posted a very patchy performance over the past 10 years. In 2007 the incipient financial crisis interrupted the dynamic upside movement charted by many housing markets. Sharp downside price corrections followed in Great Britain, Ireland, Spain and the United States. While countries such as Finland and France were also hit by the crisis, their real estate markets more or less managed to sustain the levels they had reached. Prices remained stable in Germany, Austria and Switzerland as well. But these countries had not experienced the widespread rise in prices that occurred during the mid-nineties. The housing markets in Australia, Canada, New Zealand, Norway and Sweden, by contrast, bucked the crisis: apart from a few minor setbacks, property prices continued climbing unerringly and at a rapid pace.   But what is the situation in the international housing markets right now? Are low interest rates once…

Germany: Exaggerated prices becoming far more numerous in the housing market

Sentiment in both the German housing market and the construction industry is buoyant overall. Unlike the situation a few years ago, when the property market had to hunt hard for buyers, in large parts it is now decidedly a seller’s market. Thanks to low interest rates at present loan instalment payments are usually not higher than the comparable rent. The strong willingness to buy is also fuelled by good labour market conditions and rising levels of disposable income. Moreover, the strong demand among prospective owner-occupiers is buttressed by investor interest, as the return on rents remains significantly higher than the yield on bonds. For this reason, the flats and houses on offer are swiftly absorbed by the market, and usually at high prices. At the same time, construction companies’ capacities are largely fully utilised, meaning they are hard-pressed to keep up and complete the requisite number of dwellings; the gap…

Construction permits: despite a sharp rise, still failing to match demand for new housing

In mid-November, the Federal Statistical Office published new figures on permits for residential construction in Germany. They show that in the first three quarters of the current year permits rose by a considerable 24% to around 276,300 compared with the same period in the previous year. This is a positive development, as the shortage of properties is contributing to the rapid rise in property prices in many Germany conurbations. Despite this, residential construction still lags demand for new housing. Should the current trends continue, we can count on 370,000 residential construction permits for 2016 as a whole. Completions are likely to increase by some 9% to 270,000 residential units, meaning that residential construction remains well below the figure of 400,000 homes per year, which are required according to property experts. The longer the trend persists, the greater the number of homes which will have to be built in the years…

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