Salient to Investors:

  • European countries including the UK, Denmark and Switzerland are enacting policies to stem housing bubbles, yet with German mortgage volumes at the highest in 16 years, Germans are taking out smaller home loans and repaying them faster as prudent borrowers and lenders bet that record-low interest rates and rising property values won’t last.
  • Nina Schrader at Deloitte & Touche said the craziness in other countries never took hold in Germany because of the way its banks operate and because Germans would not think of getting a 120 percent mortgage.
  • ECB report that mortgage interest payments comprise 12.8 percent of Germans’ incomes versus the average 15.9 percent in EU countries, while the loan-to-value ratio of German homes is 41.9% versus the EU average of 37.3%.
  • In Germany, average loans are 77.7% of purchase price versus 75% in the UK and 82% in the US.
  • House prices in Germany’s largest cities have risen more than 30% in the past 5 years.
  • The OECD reports that in Germany, private household debt equals 93% of net disposable income, versus 325% in Denmark, 150% in the UK and 151 percent in the US.
  • German households had a median net wealth of €51,400 in 2010, the lowest among Euro countries, partly because of a low home-ownership rate and comparatively inexpensive real estate,  and versus €115,800  in France and €173,500 in Italy.
  • Jochen Moebert at  Deutsche Bank said Germany has been less financially volatile than many other developed countries, with only 3 asset bubbles in 150 years.
  • Reiner Braun at Empirica said Germans don’t get a tax write-off for interest payments and have few incentives to borrow to buy a home in a rental-friendly culture that offers a diverse supply of apartments across all price levels. Only 53 percent of Germans are owners, versus 65 percent of Americans and 67 percent of Britons. Braun said Germans move less frequently and do not use second mortgages to pay for a vacation or a car, unlike in the US.
  • Helmut Straubinger at Bayerische LBS said German personal-liability laws means you cannot simply give back the key, like in the US. Straubinger said the low level of ownership could become a concern as Germany’s population ages and social security benefits are cut.



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