Majority of German cooperative banks experience a surge in loan provisions
In a recent survey conducted among 277 cooperative and Raiffeisen banks in the Genoverband, a rising demand for owner-occupied homes has been reported due to increasing rents. Michael Hoeck, the CEO of the association, states that more people who can afford it are deciding to buy homes, having been waiting since July 2022 and due to increased rental costs.
The survey predicts a 70% increase in financing volume for private customers' residential real estate in 2025 compared to the previous year, and a further 70% increase in 2026. This continued growth in the financing volume for owner-occupied homes is expected to persist in the next two years.
Urban markets are particularly affected, with nearly 90% of banks reporting rising rents. Rising rents could be a key driver for the increased demand in owner-occupied homes, according to the survey.
Persistent geopolitical uncertainties bring more upward risks for mortgage rates, according to Michael Hoeck. However, he states that there is no significant decline in mortgage rates expected in the near future. This stable mortgage rates environment, coupled with rising rents, is contributing to the surge in demand for owner-occupied homes.
Interestingly, the European Central Bank (ECB) left interest rates unchanged on Thursday, marking the second consecutive time following a significant reduction in borrowing costs. This decision by the ECB could further support the housing market by keeping borrowing costs low.
Despite the surge in demand, the survey does not predict a significant decline in the prices of owner-occupied residential properties. In fact, the prices for owner-occupied residential properties are expected to rise again, according to the survey.
However, it's important to note that the survey does not contain information about the four banks in the Genoverband with the greatest rent price increases in their markets over the past 12 months. Therefore, further analysis is needed to fully understand the factors driving the rental market and their impact on the demand for owner-occupied homes.
In conclusion, the demand for owner-occupied homes is on the rise due to increasing rents, and this trend is expected to continue in the next two years. Despite the upward risks for mortgage rates, stable mortgage rates and the decision by the ECB to keep interest rates unchanged could support the housing market. However, more research is needed to fully understand the factors driving the rental market and their impact on the demand for owner-occupied homes.
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