Residential Property Finance

Development of residential property financing in 2024

Despite a slight increase in real GDP in the third quarter of 2024, economic output in Germany remained subdued. Although private consumption benefited from rising wages, the labor market has recently become increasingly gloomy. The resulting uncertainty among consumers dampened the increase in private consumption. However, other significant negative factors persisted in the third quarter, resulting in a further decline in investments in equipment and buildings.

As interest rates for residential mortgage loans have stabilized in 2024 - the average effective interest rate for residential mortgage loans has been between 3.7% and 3.9% p.a. since the beginning of the year - the construction or purchase of a residential property has become easier to plan again and - in combination with the continued increase in new contract rents due to the still considerable excess demand for housing - has become more attractive. This is reflected in the vdp member institutions' financing business: after the changed interest rate environment in 2023 led to a significant decline in demand for new real estate loans, the first half of 2024 already saw a significant rebound in loan commitments for the construction and purchase of owner-occupied residential property, albeit considerably lower than the level achieved during the low-interest phase. In the third quarter of 2024, lending in this category was also above the previous year's level. Since the beginning of the year, loans for the construction and purchase of owner-occupied homes and condominiums have been approved in the amount of €41.1 billion, 27% more than in the same period of the previous year. In contrast, the financing of investment properties remained subdued, at 12.4 billion euros it was 8.8% below the previous year's figure. A total of €56.7 billion was committed for residential properties, 16% more than in the first nine months of 2023.