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Property financing: slight pick-up in new lending

 

Berlin, 28 November 2024

  • vdp member banks extend property loans totalling just under EUR 90 bn between January and September 2024

In the first three quarters of 2024, new property financing by the banks which together make up the Association of German Pfandbrief Banks (vdp) totalled EUR 89.6 bn. This represented an increase of 6.9% over the corresponding period one year earlier (Q1-Q3 2023: EUR 83.8 bn). In the third quarter of this year alone, the banks extended property loans totalling EUR 31.2 bn, thereby maintaining the level of the immediately preceding quarter (Q2 2024: EUR 31.4 bn). Compared with the third quarter of 2023, new lending rose slightly by 0.6% (Q3 2023: EUR 31.0 bn).

This increase in total new lending was driven by residential property financing. Between January and September of this year, the volume of loans for the construction and purchase of residential properties rose to EUR 56.7 bn. This was 16.0% higher than in the corresponding period one year before (Q1-Q3 2023: EUR 48.9 bn). Residential property loans in the third quarter of 2024 totalled EUR 19.4 bn, confirming the volume achieved in the immediately preceding quarter (Q2 2024: EUR 19.5 bn) and clearly exceeding by 12.8% the volume for the corresponding quarter one year earlier (Q3 2023: EUR 17.2 bn).

Commercial property loans extended by the vdp member banks in the first three quarters of this year came to a total of EUR 32.9 bn. Thus, compared with the corresponding period one year earlier, they were down by EUR 2.0 bn or 5.7% (Q1-Q3 2023: EUR 34.9 bn). New lending for commercial properties in the third quarter of 2024 totalled EUR 11.8 bn, remaining stable at the level recorded for the previous quarter (Q2 2024: EUR 11.9 bn). Compared with the third quarter one year earlier, new lending activity was down by 14.5% (Q3 2023: EUR 13.8 bn).

“Clear sign that the residential property market is stabilizing.” Jens Tolckmitt

“In every quarter of this year, total residential property financing has been considerably above the respective figure one year earlier. This is a further clear sign that the residential property market, which continues to be characterized by excess demand, is stabilizing. Although the trend in commercial property financing remains considerably more restrained, the decline has slowed down appreciably during the course of this year,” vdp Chief Executive Jens Tolckmitt pointed out.

Residential property financing: condominiums see greatest increase

Of the total volume of residential property loans extended in the first nine months of this year (EUR 56.7 bn), almost exactly half (EUR 28.3 bn) was accounted for by new loans for one- and two-family houses. This segment grew by 22.5% compared with the corresponding period one year earlier (Q1-Q3 2023: EUR 23.1 bn). Condominiums saw an even greater growth rate in relative terms (+39.1%), this segment achieving a volume of EUR 12.8 bn. By contrast, loans for multi-family houses totalling EUR 12.4 bn were 8.8% down on the corresponding period one year earlier (Q1-Q3 2023: EUR 13.6 bn).

Commercial property financing: volume of retail property loans is maintained

Whereas lending for retail properties totalling EUR 8.6 bn in the first three quarters of 2024 moved sideways (Q1-Q3 2023: EUR 8.5 bn), new lending for office properties contracted by 4.0% to EUR 16.8 bn (Q1-Q3 2023: EUR 17.5 bn). However, with a share of around 51% of all new loans in commercial property financing, the office property segment once again underscored its great importance for the commercial property asset class as a whole. The financing of hotels as well as industrial and other buildings together totalled EUR 7.5 bn, which was 15.7% less year on year (Q1-Q3 2023: EUR 8.9 bn).

Property financing portfolio records further slight growth

As at 30 September 2024, the portfolio of property loans extended by the vdp member banks came to a total of EUR 1,010.7 bn. Thus, compared with the immediately preceding quarter, the portfolio increased slightly (30 June 2024: EUR 1,007.4 bn). Properties located in Germany made up by far the greater share of the financing volume at around 87%.