Annual Report 2010 - Muenchener Hypothekenbank eG

The American federal Reserve Bank (fed) will not act as quickly, and will probably not take initial steps to increase interest rates until 2012. Starting in the third quarter of 2010, the bond markets respon- ded to the economic development and higher inflation rates with lower prices and rising yields. due to the high level of issuing activity by the public sector and banks, we also expect capital market interest rates to increase in 2011. following the newly drafted Basel iii rules on bank capital, the covered bond market will continue to grow in 2011, as the future liquidity requirements and the new restructuring law will generate increased investor interest in covered bonds. The shrinking volumes of public sector loans on bank balance sheets will reduce the outstanding volume of public Pfandbriefe, which is expected to further increase the significance of the mortgage Pfandbrief. property markets The good overall economic conditions should also have a posi- tive effect on the german property and property financing mar- ket. in particular, the robust job market and gains in real income will further strengthen demand for apartments and houses. in addition, financing conditions will continue to remain attrac- tive in a long-term comparison. As a result, experts expect the volume of residential property loans held by german credit institutions to be slightly higher in 2011 following years of stagnation. The number of building permits could once again exceed the 200,000 mark in the next year, which would cover the replace- ment needs resulting from phased out residential space. driven by expected high demand, property prices should continue to increase moderately in regions with good economic and demo- graphic development. Thus the immobilienverband deutschland (german Property Association) anticipates prices to rise by more than 2 percent in major cities. demand for residential rental space is expected to should remain high in most European countries. in light of uncertain job prospects and a clouded outlook for the future, consumers are less likely to buy their home. Thus, investments in rental properties are expected to remain an interesting investment area for property investors in the foreseeable future. only countries that have almost fully recovered from the crisis will be able to avoid this scenario and in these countries demand for owner-occupied properties is more likely to rise. in Switzerland, immigration figures will continue to decline. The high demand for property noted in recent years is thus likely to fall slightly. despite the still low interest rates, it is neverthe- less anticipated that property prices will weaken slightly. This, in turn, is likely to impact on demand for loans. The unchanged attractive level of interest rates is expected to lead to a trend toward longer-term fixed interest rates in 2011. The residential property market in the uSA has not yet shown any signs of recovering, and ownership rates will probably continue to decline in 2011. We expect the upward trend for rental apartment complexes to remain constant. The positive development in the commercial property segment observed in germany in 2010 is expected to continue. There will also be an increased demand for commercial properties – office and retail – outside the economically strong metropolitan areas. for the rental market, we anticipate a further decline in the vacancy rates for new and renovated properties with modern spaces, while the vacancy rates in older properties will increase. however, we do not expect to see a significant increase in rental prices in germany. 50 | 51 münchener hypothekenbank eg | annUaL report 2010 management report “the international property markets will continue to grow at divergent rates. it is anticipated that the good demand noted in the German residential prop- erty market will remain unchanged.”