home financing : 403 000 euros per property
High prices but low interest rates are causing the market for construction loans to grow.
by Jacqueline Hadasch
Munich Real estate prices are rising, the interest on investments is approaching zero. This is also noticeable in the German construction finance sector: last year the total volume of private real estate loans climbed to 262 billion euros. This is an increase of around eight percent compared to 2018, as a current evaluation by the Deutsche Bundesbank shows.
Companies in the mortgage sector benefit from the development. This also includes the Interhyp group. The Munich-based company belonging to the ING Group brokers private construction loans – and recorded a profit of for the past year) Million Euros. Compared to 2018 this is an increase of just under 14 percent. At the same time, the company's financing volume increased by twelve percent to a total of 25 billion euros.
This means that around nine percent of private mortgage lending in Germany comes from the Interhyp Group. “We attribute our increased financing volume to the higher real estate prices,” says Jörg Utecht, CEO of the Interhyp Group, which works with 500 banks. According to this intermediary, the price that customers paid for a property in the past year was from 354 000 on 403 000 Euro climbed. “The fact that the price increase for real estate investors is not scaring may also be due to the currently low interest rates,” Utecht suspects.
Who Interhyp says that a “perfect income and asset situation” can certainly count on interest of less than one percent. A ten-year financing of a property for the price of 250 000 Euro can currently, for example, for 0, 66 Percent interest will be completed. In this case, however, Interhyp requires an annual loan repayment of three percent; 610 euros are due per month. After ten years there is still a residual debt of 138 000 Euro. At what conditions a home builder can then pay off this remaining mortgage – that is completely unclear today, and a great risk, which is masked by the currently low interest rate.
The Interhyp Group does not expect falling property prices in the near future. “As long as there is an undersupply of housing and the infrastructure for habitable areas is poorly developed, the high prices will remain,” Utecht predicts. He expects real estate to be discounted only if more residential areas are developed in Germany. Until then, Interhyp plans to expand: For 2020 the company is planning eleven further branches in Germany. The digital offer of construction finance will also be expanded in the future.