Germany’s financial regulator has reduced the capital buffer banks must hold against residential mortgage loans, signaling greater confidence in the country’s housing market.
BaFin announced it is lowering the capital requirement from 2% to 1%. This rule, originally introduced as a safeguard during a period of real estate market stress, is now being relaxed as vulnerabilities in the sector have lessened.
“The vulnerabilities on the German real estate market have declined significantly, but have not yet been fully eliminated,” BaFin said in a statement.
The decision comes as Germany’s property sector shows early signs of recovery after experiencing one of its steepest downturns in decades. Starting in 2022, the sector saw declining prices, sluggish transactions, and several developer insolvencies.
While commercial real estate, including office and retail spaces, remains under pressure, the residential market has begun to rebound. Prices are rising again, and new mortgage lending is picking up.
Industry groups, including the ZIA property association and the VDP banking group, criticized BaFin’s move as insufficient. They argued that the capital charge should have been removed entirely.
“Even a buffer of 1% represents a burden for lenders that is not objectively justified,” said Jens Tolckmitt, CEO of the VDP.
According to BaFin, reducing the buffer will release an estimated €2 billion to €2.5 billion in capital that banks can redirect elsewhere.
However, BaFin opted to retain an additional 0.75% countercyclical capital buffer introduced in early 2022. The regulator said this decision reflects ongoing economic uncertainties and persistent risks.
“The general risk situation continues to pose challenges, and the outlook remains highly uncertain,” BaFin added.
ZIA disagreed with the decision, citing Germany’s weak economic environment and stagnant lending as reasons to ease financial constraints further.
“This is making it much more difficult to finance the entire economy,” said Aygül Özkan, CEO of ZIA.
The regulatory change points to cautious optimism among authorities, though concerns about broader market fragility and lending conditions are expected to remain into the coming year.
If you are a proptech company and want to promote your products for free, go to proptechbuzz.com and submit your products. For investors or proptech buyers, sign up on our platform to stay informed about exciting updates and trends in the Proptech Ecosystem.
Explore more Proptech news at proptechbuzz.com/news, for news tips and promotions, reach out to marketing@proptechbuzz.com.
By Proptechbuzz
By Ravi Kumar
