Immobilienfinanzierung durch Markt und Regulierung belastet

The current distortions on the German real estate markets are primarily due to the turnaround in interest rates and rising construction costs: after more than ten years of price increases, transaction and financing volumes have been declining since the second quarter of 2022. Banks are responding with caution, loan-to-value ratios remain low despite falling prices, and the focus is shifting to rented properties in inner-city locations. The persistently low default rates on real estate loans are reassuring, especially compared to the period after the financial and economic crisis of 2007/2008. This applies in particular to residential real estate, but, with some slight reservations, also to commercial real estate. However, the new construction sector is under massive strain because a lot of capital is needed and both debt capital issued by banks as well as mezzanine capital may not be sufficiently available at affordable costs. There is no short-term improvement in prospect. In view of this market environment, the question arises as to whether recent regulatory measures could further aggravate the situation. We should mention here the 150 % capital requirement for project developments and the introduction of a 2 % sectoral systemic risk buffer for the financing of residential real estate as of 1 February 2023. Since the real estate market had already passed its cyclical peak, these measures will probably not have the anti-cyclical impact primarily intended, but rather a pro-cyclical effect.