High demand for German real estate, but price growth slows

Demand for German residential real estate is still robust, but the pace of rising prices is easing, an investment specialist said Friday.

Stefan Mitropoulos, an analyst at Helaba, a major bank in Frankfurt, told dpa the market was being driven by Germans eager to invest.

“The low interest rates for housing finance mean that buying property remains affordable, even after prices have risen,” he said, adding that near-zero returns on fixed-interest investments continued to push wealthy Germans towards real estate as the best alternative.

Germany‘s rising prices have contrasted with the cooldown in China‘s real estate market, where tumbling prices this year brought a multi-year property bubble to an end.

Signs have been growing in recent weeks that the German economy is growing again after narrowly avoiding a recession in the third quarter, when it grew by a meagre 0.1 per cent.

The Bundesbank, Germany‘s central bank, said in its November report that residential property in Germany‘s seven biggest cities had gained an average 5.75 per cent in value on an annual basis in the third quarter, an easing from 7 per cent in the first half of this year and 9 per cent last year.

Mitropoulos forecast that residential price rises would continue in 2015, noting that the European Central Bank (ECB) has set its prime interest rate at 0.05 per cent. He said ordinary Germans can now pick up 10-year mortgage loans at 1.7-per-cent annual interest.

Commercial property value in Germany has been less robust but has been buoyed by residential prices, Germany‘s Deutsche Bank said.

“German residential property remains affordable and there is anecdotal evidence that both foreign and institutional investors are being drawn to the German real-estate market,” Deutsche Bank said in a market overview last month for its customers.

The bank added that German residential real estate prices have risen 20 per cent in the past five years nationally, while prices in the big cities, where land availability is limited, had risen by more than 40 per cent in that time.

(Source – http://en.europeonline-magazine.eu/expert-high-demand-for-german-real-estate-but-price-growth-slows_369407.html)

German Banks Chase Homebuyers Ensuring Biggest Profits

Commerzbank AG (CBK) is offering discounts on home loans in Germany and Deutsche Bank AG (DBK) plans to blanket the country with mortgage advisers. To keep pace, ING Groep NV (INGA)’s German unit is considering lowering interest rates in big cities.

“We’re feeling very sharp competition and we expect further competition in 2015,” said Helmut Straubinger, head of credit at Bayerische Landesbausparkasse, a Munich-based lender that lost market share this year. “A lot of banks have been pushing into the relative safety of property financing.”

Germany’s banks are trying to expand in one of Europe’s safest mortgage markets as record-low interest rates make fixed-income investments less attractive. In Germany, borrowers rarely default, employment is near an all-time high and housing prices are low compared with other European markets. Lenders earn an average profit margin of 1.2 percent from mortgages compared with yields of less than 1 percent from German government bonds, according to data compiled by Barkow Consulting.

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“Banks are taking market share from each other,” said Jochen Moebert, an economist at Deutsche Bank in Frankfurt. “Banks see real estate as a growth priority because it’s one segment that’s doing well.”

Lenders are competing for customers in a market that hasn’t been growing. German homebuyers borrowed 168 billion euros ($209 billion) in the first 10 months of 2014, a 0.4 decrease from a year earlier, according to Bundesbank data. The total amount of outstanding mortgages rose 2 percent from a year earlier to 1.18 trillion euros.

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Commerzbank, Germany’s second-biggest bank, expects to increase lending this year by about 30 percent after expanding at about the same rate in 2013. The company’s market share has grown to about 12.4 percent from less than 5 percent in 2011, said Falko Schoening, head of lending at the Frankfurt-based bank. …(READ MORE)

Spiraling Rents in Munich Mean Bonus to Attract Teachers

Munich’s Herz-Jesu kindergarten needed nine months and 9,000 euros ($11,200) of ads to find a new teacher. In the meantime, it cut opening hours and relied on a 74-year-old nun to keep running.

As Germany’s fastest-growing city makes good on a pledge to build 62 daycare facilities, it’s struggling to fill them with staff, who are having a tough time paying spiraling rents.

The shortage of preschool places, along with housing, is among the costs Muencheners are paying for a boom that has made their city the country’s most expensive. An attempt to ease the bottleneck by offering childcare workers a 200 euro-a-month supplement backfired: Thousands more city employees demanded similar payments, which officials have rejected as too costly. (Full Article – http://www.bloomberg.com/news/2014-12-15/spiraling-rents-in-munich-mean-bonus-to-attract-teachers.html)