In July, consumers in Germany requested more real estate loans than they had in two years. German banks’ new business with private households and the self-employed rose to 19.5 billion euros, a good quarter more than in the same month last year. The volume was last higher in July 2022, according to an analysis by the analysis firm Barkow Consulting, which is based on data from the European Central Bank. New business in construction financing had already recovered in June, with growth of 17 percent compared to the same month last year to 16.3 billion euros.
Rising rents and a recent drop in interest rates appear to have revived the collapsed market for construction financing, writes Managing Director Peter Barkow. “The upturn is here.” So far this year, new business, at 112 billion euros, is already almost a fifth (18 percent) above the previous year’s figure. Construction interest rates have recently gone downhill: the conditions for 10-year loans are currently back below 3.5 percent after highs of 4.2 percent in the fourth quarter of 2023, says Barkow.
Recovery from deep crisis
New business in private construction financing had boomed until spring 2022 and peaked at a monthly volume of a good 32 billion euros. But a sharp rise in interest rates put an end to the boom. This made real estate loans more expensive after years of low interest rates. As construction costs also rose sharply, many people gave up their plans to build a house or buy property. Last year, banks’ new business in construction financing collapsed to 161 billion euros – 37 percent less than in 2022, according to data from Barkow Consulting.
The Association of German Pfandbrief Banks (VDP), which represents the most important real estate financiers in Germany, also recently noted an increase in lending business. It recorded the largest new business in real estate loans since the third quarter of 2022, driven by stronger demand for financing for houses and apartments. This increases the signs that the real estate crisis is coming to an end. The VDP recently noted a stabilization in real estate prices for the second quarter.
© dpa-infocom, dpa:240903-930-221524/1
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