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Real estate market 2023: Pfandbrief institutions profitable despite challenges
Pfandbrief banks remain profitable and resilient despite market challenges. Find out more about the resilience of the vdp institutes in difficult times.
Real estate market 2023: Pfandbrief institutions profitable despite challenges
The Pfandbrief banks, which are united in the Association of German Pfandbrief Banks (vdp), have proven their resilience to crises in the 2023 financial year. Despite falling real estate prices and lower financing activities, the member institutions remained profitable and resilient. The difficult market environment, characterized by increased construction costs, inflation and interest rate increases, presented the industry with enormous challenges. Nevertheless, the Pfandbrief banks were able to maintain their stability thanks to appropriate risk provisions and conservative risk structures.
Particular attention was paid to the German commercial real estate sector, which was more affected by the market downturn than the residential real estate sector. Gero Bergmann, the President of the vdp, emphasized the resilience of the German office real estate market and pointed out that it is crucial to take into account the differences between the European and US markets. Despite the challenges, a positive development was noted in the refinancing of Pfandbrief banks in 2023, which is due to investors' trust in the Pfandbrief and its legal security.
The declines in real estate financing business in 2023 were significant, with a reduced volume of real estate loan commitments in the commercial and residential real estate sectors. Business with residential property loans in particular declined. However, the Pfandbrief banks expect an increase in transactions and financing in 2024. The Pfandbrief outstanding rose to over EUR 400 billion for the first time since 2014, indicating continued demand for Pfandbriefe.
The Pfandbrief banks are also struggling with challenges related to banking regulation. Jens Tolckmitt, the chief executive of the vdp, emphasized the need for a regulatory moratorium and a review of existing measures. The balance between sensible and excessive regulation has increasingly been lost, which is inhibiting lending and pushing traditional banking into less regulated areas. A rethink and a revision of the regulations are called for in order to make it easier to finance the real economy and support the achievement of political goals.