Pfandbrief-issuers see upswing in commercial and residential lending

The Association of German Pfandbrief Banks (VdP) issued a fairly positive statement on its new outlook, and expects new business to pick up in 2024, with commercial property lending making a slight comeback.

The association’s member banks approved residential and commercial property loans in 2023 of €110 billion, a decrease of 31.3% on the €160bn lent in 2022. But the final quarter in particular, at €26.2bn, was up 5.2% on a year earlier, suggesting business is stabilising, according to VdP boss Jens Tolckmitt.

At minus 23.8%, the decline in commercial property loans for 2023 was significantly lower than in residential property loans at minus 35.8%.

Loans approved for the construction and purchase of residential property in Q4 of 2023 fell by 11.6% year-on-year to €17.2 billion. Financing for commercial properties, on the other hand, increased by 42.9% to €11 billion in the same period. Here, financing was dominated by loan commitments for office properties, which accounted for a 51% share: €5.6 billion euros were extended, compared to €6.1 billion in the third quarter of 2023 and only €3.4 billion in the fourth quarter of 2022.

With a volume of €2.7 billion, newly committed loans for retail properties also showed a decline compared to the previous quarter of 2023 (€3.5 billion) and an increase compared to the same quarter of the previous year (€1.2 billion). New financing business for hotel and industrial buildings reached volumes of €1.1 billion and €0.2 billion respectively in the fourth quarter, similar levels to the same periods of the previous year.

The final quarter of the year is traditionally when lending is at its lowest. Tolckmitt said that the upswing in property loans in the final quarter augured well for 2024, with the expectation of lending rates having peaked and greater planning certainty for investors.