Banks expecting slump in demand for housing loans

Germany’s banks are now definitely expecting a sharp decline in demand for private housing loans in the coming three months, according to the Bundesbank. At the same time, given the uncertainty surrounding jobs and businesses, they are tightening lending standards.

The Bundesbank's quarterly Bank Lending Survey contains no major surprises, at first glance. That the banks have tightened the reins on lending standards for private residential real estate loans in recent months was to be expected given the corona crisis.  

However, hidden in a subordinate clause, the Bundesbank reports that the banks expect "a sharp slump in demand for private residential property loans" in the coming months. By contrast, demand for corporate and consumer loans are expected to rise.

Just how severe the slump in housing loans could be is illustrated by the results of the survey carried out between 19th March and 3rd April in which 32 German banks took part. On balance, 59% of the banks expect a decline in demand. Such a strong turnaround is unusual. The highest rates of change in recent years were recorded in 2011 at 41% and 36% respectively - at the time, however, in the form of expected increases in demand for credit. But for now, the increase in demand for housing loans recorded by several banks (24%) in the past three months now appears to be a positive marginal note at best.