Real Estate Lending

Germany’s Risky Mortgage Boom

  • Why it matters

    Why it matters

    A mortgage boom in the US led to the 2008/2009 global financial crisis, which is why financial watchdogs are keeping a close eye on property markets, even in stability-conscious Germany, where house prices and mortgages are rising fast.

  • Facts

    Facts

    • German real estate lending reached €235 billion in 2016, up a quarter from 2009, according to research for Handelsblatt by Barkow Consulting.
    • Bundesbank board member Andreas Dombret told Handelsblatt that banks were now more willing to take risks, but Germany’s booming real estate market was not yet a bubble.
    • Banks are increasingly borrowing short and lending long to boost net interest income. But if interest rates rise, the strategy could turn problematic.
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    Audio

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Is a bubble brewing?

Germany’s banks are cashing in on the real estate boom by ramping up their mortgage lending at growth rates not seen in many years, according to research by Barkow Consulting, commissioned by Handelsblatt.

Real estate lending reached €235 billion, or $266 billion, in 2016, up a quarter from 2009, the Barkow study showed. The loan portfolio in bank balance sheets has been growing at annual rates of almost 4 percent in recent years.

“Those are high growth rates by German standards even if they’re not nearly as high as in some countries before the financial crisis,” said Peter Barkow, founder of Barkow Consulting. The last real estate boom in Germany was back in the early 1990s, following unification.

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