PROPERTY: Mortgage lending on a stable footing in Germany

 * Slight decline in European commercial investments *

The third round of stress tests carried out by the Bundesbank and the Federal Financial Supervisory Authority (BaFin) concluded that, despite constantly rising property prices, there are no indications of a property price bubble in Germany, according to the Immobilien Zeitung.

The latest stress tests analysed 1,555 small and medium-sized credit institutions and revealed that property prices have risen by up to 50% since 2010, leading to individual overvaluations of between 15 and 30% above fundamentally justifiable price levels.

At the same time, the volume of mortgage lending has increased, although the report sees this as no cause for concern because mortgage lenders have not significantly relaxed their mortgage approval standards or credit conditions. In comparison with the growth registered during the early years of the century, the current rate of growth is described as “moderate”.

Banks and consumer protection agencies had feared that last year’s new residential mortgage lending directive would lead to a dramatic fall in mortgage lending, a fear that has clearly not materialised.

Meanwhile, the Borsen Zeitung reported on figures from Knight Frank revealing a 7.9% decline in transaction volumes on the European commercial property investment market in the first half of the year, compared to H1 2016.

Investment totalled EUR 90.3 bln, including EUR 22.4 bln in Germany (+41.2%), followed by EUR 22.1 bln in the UK (-19.9%). As a result of political uncertainty created by the UK’s Brexit vote, and the impact this is having on the country’s property markets, Germany has firmly established itself as the leading European investment destination for North American investors and the most important hub for intra-European investment. Catella remains optimistic regarding Europe’s commercial property market and has forecast that the flow of investment into the sector will continue, and may even increase, despite the range of existing geo-political risks. (Source: GREN)