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To date, despite the high price, consumer demand in the German real estate market is quite high. Since financing from banks is carried out at fairly low interest rates.
Experts at the Federal Office of the German Financial Supervisory Authority (Bafin) fear that the current housing bubble will eventually burst. Currently, loans for residential real estate in Germany amount to more than 1.6 trillion. euro. The head of Bafin, Mark Branson, warns that, given financial stability, it is now necessary to switch to a regime that prevents possible negative consequences.
In addition, Bafin instructs banks to set aside their own capital of 0.75% to increase resilience during the crisis. However, some experts believe that 0.75% is not enough. Banks will have to allocate 2% of their capital to secure loans for residential real estate.
How do credit institutions assess the situation?
Despite Branson’s optimism that preventive measures will help avoid a credit crunch, credit institutions themselves view the situation differently.
German banks believe that the increase in capital requirements will cause a significant limitation of the credit capacity of banks and savings banks. Ultimately, the consequences will affect clients who are already suffering from high real estate prices. And in the future, buying real estate is likely to become even more expensive and difficult. Credit institutions and building societies are still reluctant to predict how much loans will actually rise in price.