New lending from vdp members rose at the end of the third quarter
New property lending by members of the Association of German Pfandbrief Banks (vdp) saw a slight upturn at the end of the third quarter. At €30.7 billion, new loan commitments for residential and commercial property rose by 15.8% compared to the previous quarter's €26.5 billion. However, it still represented a year-on-year decline of 21.5%, from the corresponding quarter (Q3 2022) of €39.1 billion.
The vdp is one of the five umbrella organisations of the German banking industry, and represents the most important lenders for residential and commercial construction, as well as for the state and its institutions.
The vdp's managing director, Jens Tolckmitt, expressed cautious relief at the improved lending figures. "New property financing business remains at a subdued level compared to previous years. However, we are now seeing an increase for the third quarter in a row. Commitments for both residential and commercial properties are increasing, which indicates a slight stabilisation of the financing market."
Property investing remains challenging, he said, with the market being weighed down by geopolitical tensions, economic uncertainty, and the low level of construction activity in the residential sector. But, he added, "The end of the dynamic rise in interest rates appears to be increasingly giving investors and private households more planning security again."
New lending from vdp members rose in the quarter by 13.4% in residential and 19.0% in commercial property over Q2. In both cases, lending was down year-on-year by 22.5% (residential) and 20.2% (commercial).
In a further breakdown, the vdp figures show that of the €16.9 billion in residential property loans approved in Q3, slightly less than half was for financing detached and semi-detached houses (€8.0 billion after €7.5 billion in Q2). Loans for condominiums and multi-family homes also increased quarter-on-quarter to €3.1 billion and €4.8 billion respectively, but were still well below the comparable figures from Q3 of 2022.
Of the €13.8 billion in commercial property lending in Q3, offices dominated with a 45% share, at €6.2 billion, well down on both the previous quarter and on Q3 2022. New lending for retail property was €2.9bn - up on Q2 but down on last year's equivalent quarter. New loans for hotels and industrial buildings came to €1.2 billion and €0.2 billion respectively.
Taking total lending outstanding, the vdp member banks portfolio of loans was €1,004.0 billion was stable on a quarterly basis, and increased slightly, by 1.1% over last year's €993.0 billion at the same time.
Surge in lending for multifamily housing
Noteworthy in the lending figures for the quarter is the surge in lending for multi-family homes, or 'Zinshäuser', which jumped 41.2%. By contrast, loans for detached and semi-detached house rose by only 6.7%, and for condominiums by 6.9%.
In fact, lending on a year-on-year basis against multi-family homes is only down by 4% - very low compared to other sectors. A note by brokers Schick Immobilien suggested that equity-rich German family offices were taking advantage of fallen prices to buy up many more Zinshäuser, with their stable cash-flow provided by tenants facing steady rent rises.
A recent study by property portal ImmoScout24 said buyers of such Zinshäuser are now looking at yields of more than 5%, particularly for properties outside the major cities, and especially in eastern Germany.
