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ePaper created 2012-04-20, 15:08:32 | version 1.23.0
51Management Report Münchener Hypothekenbank eG The future of all the other European residential property and financing markets will also depend heavily on the further devel- opment in the European Union. Because of the high pressure to consolidate state budgets and the low level of trust in the finan- cial markets, prospects for an early recovery and a notable up- swing in the residential property market are poor in the short to medium term. “German residential property will remain in demand as a solid investment.” The forecast for the Swiss residential property market in 2012 still foresees mostly stable development and rising prices. This applies in particular to single-family homes and condominiums; there is already some slowing in the area of new construction projects for multi-family homes. Forecasts for interest rates assume consistently low levels for residential property financing. An increased risk of a downturn is expected in 2013 as economic growth is also slowing in Switzerland. The residential property market in the USA is again not expected to see a sustainable upswing in the near future. The recovery in the rental apartment market may continue to stabilise further in the short to medium term. Due to current high demand by renters and investors, there is also a possibility that this market segment will see a slowdown in the medium term – following the completion of new housing projects. According to experts, the transaction volume for the German commercial property market will remain approximately at the level noted in 2011. Investors will continue to prefer core pro- perties and avoid risky investments. Supply is expected to exceed demand in “B” locations and for riskier properties. Moderate rent increases are possible for good office properties in the rental segment, and the retail sector is expected to develop similarly. The financing market will largely be shaped by the increasing regulatory requirements for banks, and by the increasing num- ber of maturing loans. est and extensive liquidity in 2012 and 2013. The American Federal Reserve Bank (Fed), for instance, announced at the end of January 2012 that it did not intend to change the current key interest rate until the end of 2014. The ECB is not expected to increase its interest rate in 2012. Furthermore, another cut in interest rates cannot be ruled out if the inflation rate in Europe reaches the ECB’s target range of about 2 percent. As was the case previously, development in the financial markets will continue to depend largely on the further development of the European sovereign debt crisis. Therefore covered bonds from the core EU nations will continue to be valued by investors as a safe security. This particularly applies to German Pfandbriefe. The Pfandbrief market will be driven by two main factors in 2012. The volume of new Public Pfandbriefe issued will proba- bly continue to decline due to the sovereign financial situation in Europe, while the volume of Mortgage Pfandbriefe issued will increase. The spreads among individual Pfandbrief issuers will remain at a high level; Münchener Hypothekenbank’s Pfandbriefe are expected to remain very popular with investors. Overall, the Association of German Pfandbrief banks anticipates that the volume of new Pfandbriefe issued will increase slightly to about € 74 billion. Property and property financing markets It’s likely that the economic slowdown in Germany will only have minor effects on the German residential property market. As long as uncertainty persists about the future of Europe and its currency, German residential property will remain in demand as a solid investment. As a result, prices for residential property will continue to in- crease; however, there are indications that this growth will be smaller than it was during the year under review. Thus the aver- age price increases will remain at a moderate level nationwide. Still, exaggerations cannot be ruled out in certain markets, es- pecially in large metropolitan areas. Interest rates are expected to remain at a relatively low level. Over the course of the year, however, depending on the further development of the sover- eign debt crisis, an increase is anticipated for long-term inter- est rates. Thus in the area of private property financing, we expect to see a steady demand for longer-term loans with terms of 20 years or more.