After two years of crisis for those interested in owning their own home, the financial sector is reporting the first signs of a cautious revival in the private real estate market. In the first two months of this year, real estate loan commitments to private customers rose slightly again for the first time, as financial intermediaries, the Schwäbisch Hall building society and the Bavarian savings banks report. And according to figures from the Bundesbank, almost 14.7 billion euros of interest-linked private housing loans were granted in Germany in January, the highest value since March 2023.
Two years ago, the rapid rise in loan interest rates resulted in a collapse in real estate lending almost overnight. In the first quarter of 2022, there was a short-lived boom in anticipation of the upcoming interest rate increases because many home buyers wanted to secure the interest rates that were still low at the time. In March 2022, according to Bundesbank figures, private customers borrowed almost 32.3 billion euros in real estate loans. In April 2022 there were already more than six billion less and at the beginning of 2023 there were only a good 12 billion. The average APR climbed from 1.69 percent in March 2022 to 4.27 percent last November.
Financial industry hopes for a turnaround
Now the financial industry is hoping for a turnaround: “We have seen a significant upturn in the construction financing market since the beginning of the year,” says Jörg Utecht, head of the Munich financing broker Interhyp. According to Utecht, January 2024 was the month with the highest number of applications ever in the group’s private customer business.
Since the peak in November, real estate loans have become cheaper again. “From the interest peak in November 2023 of more than 4.2 percent for ten-year loans, building interest rates have fallen to currently 3.55 percent,” says Utecht. “Compared to last November, tens of thousands of euros in interest costs can currently be saved over the entire term of the loan.” Interhyp assumes that interest rates will remain at a level of around 3.5 percent in the next few months.
Not only are the interest rates a little cheaper again, houses and apartments are also no longer quite as expensive. Even before interest rates fell, property prices had fallen last year. Since many sellers had difficulty finding buyers, many houses and apartments remained on the market longer and the supply increased.
“We are also looking at the construction financing market this year with cautious optimism,” says a spokesman for Schwäbisch Hall, Germany’s largest building society. “The bottom in construction financing has probably passed.” The company expects that relatively stable interest rates combined with moderately falling property prices and sharply rising rents will motivate more people to buy again.
A third of the residential buildings are considered to have not been renovated in terms of energy efficiency
There is also a second factor: the need for energy-related renovations in older houses. “A third of the 20 million residential properties in Germany are considered to have not been renovated in terms of energy efficiency,” says the Schwäbisch Hall spokesman. Many owners also apply for loans for this. “This has an annual financing potential of 80 billion euros.”
Interhyp and Schwäbisch Hall are not alone: the 60 Bavarian savings banks also reported last Wednesday on the increase in real estate loan commitments to private customers in the first two months. “That makes us confident that this can continue,” says Stefan Proßer, vice president of the Bavarian Savings Bank Association. And the Lübeck-based financial service provider Hypoport also reported increasing figures for its financing portal Europace in the fourth quarter.
