Positive start to the year 2024: Property loans extended pick up slightly
Berlin, 28 May 2024
- Volume of new lending by vdp member banks rises by 4.7%
The volume of real estate financing provided by the banks which together make up the Association of German Pfandbrief Banks (vdp) came to EUR 27.0 billion in the first quarter of 2024. The slight increase of 4.7% against the corresponding quarter one year earlier and of 3.1% against the immediately preceding quarter resulted, above all, from stronger lending activity for the construction and purchase of residential properties.
Residential property loans totalled EUR 17.8 billion. This was 7.2% higher year on year and 17.1% higher quarter on quarter. With that, residential property financing recorded its best quarterly result since the third quarter of 2022 (EUR 22.1 billion). New lending was still a long way from the level reached during the zero-interest phase, however. The volume of commercial property loans was unchanged year on year at EUR 9.2 billion.
“Residential property financing is sending positive signals.” Jens Tolckmitt
“New lending has consistently totalled between EUR 15 and 18 billion for six quarters. Our current figures point to an easing in this business segment. Residential property financing is sending positive signals. The financial scope of private households is benefitting from rising real wages and stable loan interest rates. Rents under new contracts continue to increase given the excess demand for housing. This is again making home ownership look more attractive,” remarked vdp Chief Executive Jens Tolckmitt. Institutional investors, on the other hand, remain reticent. Accordingly, the financing of rental housing and commercial properties got off to a restrained start in 2024. Nevertheless, thanks to the likelihood of a positive development for residential property loans, we expect the vdp member banks’ property financing business as a whole to grow compared with 2023.”
New residential property lending: some segments see double-digit growth
Total residential property lending, which rose by 7.1% to EUR 17.8 billion between January and March 2024, was made up of new loans for one- and two-family houses (EUR 9.0 billion), condominiums (EUR 3.7 billion), multi-family houses (EUR 4.0 billion) and other residential properties (EUR 1.1 billion). Growth was primarily driven by an upturn in financing for owner-occupied homes (owner-occupied houses and condominiums), whereas the lending volume for multi-family houses was down both year on year and quarter on quarter.
Sideways movement in commercial property loans
The volume of new commercial property lending in the first quarter of 2024 was on a par with the corresponding period one year earlier and was again dominated – in keeping with the traditional meaning – by loans for office properties, which accounted for a volume of EUR 5.5 billion or a share of around 60%. Compared with the first quarter of 2023, loan commitments for office properties expanded by 19.6%, and contracted by 1.8% compared with the immediately preceding quarter. The lending volume for retail properties fell both year on year and quarter on quarter by 29.6% to EUR 1.9 billion (Q1 2023 and Q4 2023: EUR 2.7 billion in each case). The volumes for hotels, industrial buildings and other commercial properties amounted to EUR 400 million, EUR 300 million and EUR 1.1 billion respectively between January and March of this year.
Property financing portfolio at roughly end-2023 level
As at 31 March 2024, the portfolio of real estate loans extended by the vdp member banks totalled EUR 1,003.5 billion, almost equalling the level recorded as at end-2023 (EUR 1,004.1 billion).