HilfeHilfe
2019-07-02 06:03:48
- #1
The Germans have to increasingly go into debt to fulfill their wish for their own four walls. Because their equity does not grow as fast as real estate prices. Many German citizens do not benefit much from the record-low interest rates.
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Anyone who wants to know how the situation in the German real estate market looks can study endless statistics on prices, rents, and wages. Much simpler is to take a look at the latest figures on German construction financing. And these are quite something.
German citizens now have to push their financial limits more and more to make the dream of their own home come true. On average, Germans had to go into debt with 248,000 euros, which is a record level. A year ago, the average loan amount was still 34,000 euros lower at 214,000 euros.
The trend toward higher debt is shown by numbers from the financial service provider Dr. Klein. The company is one of the largest intermediaries for construction financing in Germany and therefore has a good overview of the German real estate market.
Source: Infographic WELT
The statistics reveal something else as well. Citizens have to increasingly mortgage their desired property. The loan-to-value ratio, the so-called loan-to-value ratio, is at 84.02 percent, exceeding the 80 percent mark for the first time. As recently as 2016, builders and buyers brought significantly more than 20 percent equity into their financing, with the average loan-to-value ratio between 76 and 79 percent.
The reason for this development is the unstoppable real estate boom in Germany, which drives prices ever higher. Since the beginning of the year alone, the Europace Housing Index has risen by more than four percent. The market barometer measures the average price development of real estate in this country.
In large cities and other trendy regions, prices have risen significantly more. Since the savings of prospective buyers have not grown at the same pace as the purchase prices, German citizens have to take on more and more debt. Moreover, with the real estate prices, the additional purchase costs for notarization or property transfer tax have also increased. This further burdens the buyers.
Average price per square meter over 3000 euros
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An equity of 20 percent was for decades the benchmark for typical financing. Few loans were granted below this. But in times of the real estate boom, this no longer seems to apply. Debt financing is approaching the critical rate of 90 percent. Although property buyers can finance their property 100 percent externally, the loan gets more expensive the less equity they bring.
Banks scale their interest rates according to the loan-to-value ratio. This is shown by an analysis by Finanztest. According to it, top conditions are mostly available only for loans up to 70 percent of the purchase price. Up to an 80-percent financing, the interest rate rises only gradually. After that, it goes steeply up. It gets particularly expensive for borrowers who borrow more than 90 percent from the bank, according to Finanztest.
The interest rate for full financing is half to one percentage point above the best rate. That sounds little but makes the entire loan more expensive by up to 50 percent in some cases. According to calculations by Finanztest, the interest rate that becomes due for financing above the critical 90-percent threshold is at individual providers 8.8 percent and thus at the level of overdraft credits.
READ ALSO
MONEY INVESTMENT
How lucrative this real estate bet really is
Many German citizens gain little from the record-low interest rates. They have to pay princely surcharges if they do not bring enough equity. And they have to take on increasing debt because of rising real estate prices. For many homebuilders and apartment buyers, this means a zero-sum game.
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Start now with the right precaution! You don’t have everything in your hands. But your future.
An enlightening calculation has been made by the experts of FMH financial consulting: A property buyer who acquired a property in 2014 paid an average price per square meter of 2105 euros at that time. Meanwhile, this value is over 3000 euros. Accordingly, consumers have to take on more debt. Thanks to a lower mortgage interest rate, the monthly burden has roughly remained the same. However, the calculation excludes the costs of higher external financing.
German citizens seem to feel somewhat uneasy about the ever-increasing real estate debt. They try to make the loans as manageable as possible. They choose long terms for the loans in order to secure the low interest rates for as long as possible. They do not want to fall into the refinancing trap if the conditions are then significantly higher after the loans expire. According to Dr. Klein's numbers, borrowers can fix the current interest rates for over 14 years and four months.
619
Advertisement
We get your money back Dieselanwalt.com is your partner in the diesel scandal
Anyone who wants to know how the situation in the German real estate market looks can study endless statistics on prices, rents, and wages. Much simpler is to take a look at the latest figures on German construction financing. And these are quite something.
German citizens now have to push their financial limits more and more to make the dream of their own home come true. On average, Germans had to go into debt with 248,000 euros, which is a record level. A year ago, the average loan amount was still 34,000 euros lower at 214,000 euros.
The trend toward higher debt is shown by numbers from the financial service provider Dr. Klein. The company is one of the largest intermediaries for construction financing in Germany and therefore has a good overview of the German real estate market.
Source: Infographic WELT
The statistics reveal something else as well. Citizens have to increasingly mortgage their desired property. The loan-to-value ratio, the so-called loan-to-value ratio, is at 84.02 percent, exceeding the 80 percent mark for the first time. As recently as 2016, builders and buyers brought significantly more than 20 percent equity into their financing, with the average loan-to-value ratio between 76 and 79 percent.
The reason for this development is the unstoppable real estate boom in Germany, which drives prices ever higher. Since the beginning of the year alone, the Europace Housing Index has risen by more than four percent. The market barometer measures the average price development of real estate in this country.
In large cities and other trendy regions, prices have risen significantly more. Since the savings of prospective buyers have not grown at the same pace as the purchase prices, German citizens have to take on more and more debt. Moreover, with the real estate prices, the additional purchase costs for notarization or property transfer tax have also increased. This further burdens the buyers.
Average price per square meter over 3000 euros
Advertisement
An equity of 20 percent was for decades the benchmark for typical financing. Few loans were granted below this. But in times of the real estate boom, this no longer seems to apply. Debt financing is approaching the critical rate of 90 percent. Although property buyers can finance their property 100 percent externally, the loan gets more expensive the less equity they bring.
Banks scale their interest rates according to the loan-to-value ratio. This is shown by an analysis by Finanztest. According to it, top conditions are mostly available only for loans up to 70 percent of the purchase price. Up to an 80-percent financing, the interest rate rises only gradually. After that, it goes steeply up. It gets particularly expensive for borrowers who borrow more than 90 percent from the bank, according to Finanztest.
The interest rate for full financing is half to one percentage point above the best rate. That sounds little but makes the entire loan more expensive by up to 50 percent in some cases. According to calculations by Finanztest, the interest rate that becomes due for financing above the critical 90-percent threshold is at individual providers 8.8 percent and thus at the level of overdraft credits.
READ ALSO
MONEY INVESTMENT
How lucrative this real estate bet really is
Many German citizens gain little from the record-low interest rates. They have to pay princely surcharges if they do not bring enough equity. And they have to take on increasing debt because of rising real estate prices. For many homebuilders and apartment buyers, this means a zero-sum game.
Advertisement
Start now with the right precaution! You don’t have everything in your hands. But your future.
An enlightening calculation has been made by the experts of FMH financial consulting: A property buyer who acquired a property in 2014 paid an average price per square meter of 2105 euros at that time. Meanwhile, this value is over 3000 euros. Accordingly, consumers have to take on more debt. Thanks to a lower mortgage interest rate, the monthly burden has roughly remained the same. However, the calculation excludes the costs of higher external financing.
German citizens seem to feel somewhat uneasy about the ever-increasing real estate debt. They try to make the loans as manageable as possible. They choose long terms for the loans in order to secure the low interest rates for as long as possible. They do not want to fall into the refinancing trap if the conditions are then significantly higher after the loans expire. According to Dr. Klein's numbers, borrowers can fix the current interest rates for over 14 years and four months.