Pfandbrief banks expand new real estate business and issue volume in the 2025 financial year

The 2025 financial year was pleasing for the institutions that are members of the Association of German Pfandbrief Banks (vdp): despite the challenging market environment, they were able to increase the granting of new real estate loans and their Pfandbrief volume. On the one hand, this was due to the fact that the recovery phase on the real estate markets continued throughout the year. On the other hand, Pfandbriefe continued to meet with strong demand from investors.

"In view of the numerous crises and geopolitical conflicts, the vdp member institutions have successfully mastered the 2025 financial year."
Gero Bergmann

At today's annual press conference of the association, vdp President Gero Bergmann emphasised that the challenges for the economy as a whole have risen sharply in recent years, and this also applies to the financial sector. Against this backdrop, the vdp member institutions had successfully mastered the 2025 financial year. They benefited from the positive development of the markets relevant to the Pfandbrief business: After the abrupt turnaround in interest rates, the real estate market in Germany continued its recovery phase that began in 2024 in 2025. Prices have risen steadily, but much less dynamically than in the low interest rate phase. The real estate financing business experienced significant growth in the year under review, according to Bergmann. 2025 was also a good year for the Pfandbrief market: "Both Pfandbrief sales and outstanding increased noticeably."

Referring to the recent geopolitical escalations, Bergmann was cautious about the outlook for 2026 as a whole: The war in Iran has not only increased the already high level of uncertainty in the market, but is also having a negative impact on inflation and economic growth. "Just as well as our member institutions have dealt with the crises in recent years, they will also know how to master the current difficult conditions."

"From today's perspective, prices are still expected to rise slightly in 2026."
Gero Bergmann

For the further development of real estate prices and the granting of new real estate loans, the future development of construction costs and interest rates will be very important. The business outlook for the Pfandbrief banks is also fundamentally positive in the current year.

In 2025, real estate prices in Germany rose from quarter to quarter: In the final quarter, the vdp real estate price index showed an increase of 4.0% compared with the same period a year earlier. This development was once again driven by prices for residential real estate, which rose by 4.2% across Germany within one year, while growth in the top 7 cities amounted to 4.7%. By contrast, commercial real estate prices, which are made up of office and retail property prices, rose somewhat lessly nationwide, by an average of 3.5%.

"Prices for offices financed by banks completed bottoming out in 2025 and developed slightly positively again."
Gero Bergmann

The upward trend in real estate prices in Germany, which began in 2024, continued last year, Bergmann underlined. "In the meantime, prices for residential real estate are not far from their record level reached in the summer of 2022." Due to the ever-increasing shortage of housing, further increases in residential property prices and rents are to be expected. Commercial real estate prices are also showing a sustained upward trend – but this is more subdued than prices for residential properties. As a reason, he cited the significantly greater dependence of the office and retail real estate market on the general economic development: "Prices for offices financed by banks have bottomed out in 2025 and have developed slightly positively again."

For the future development of the office real estate market, the decisive factor is how the home office quota and the increasing use of AI tools affect the demand for space. "We are currently expecting a further differentiation of the office market: top properties with high energy efficiency in sought-after locations will continue to record price and rent increases. Older properties in the periphery with higher energy consumption will find it increasingly difficult to find interested parties," says Bergmann. "Anyone who assesses the office market negatively across the board fails to recognise the strong demand for modern properties in prime locations with an excellent energy profile."

In 2025, the Pfandbrief banks extended noticeably more real estate loans than in the previous year: the financing volume rose by 15.7% to EUR 148.6 billion, benefiting above all from the positive development in the granting of residential real estate loans: while commitments for commercial real estate increased by 12.9% to EUR 56.0 billion in the year under review, the residential real estate financing business increased by 17.5% to EUR 92.6 billion. With a share of 79%, the vast majority of the financing volume remained attributable to properties in Germany.

"The increased lending for residential real estate is gradually affecting the extremely important new residential construction again."
Gero Bergmann

Bergmann emphasised that almost all property classes had recorded higher demand for financing last year. Particularly pleasing: "The increased lending for residential real estate affects not only existing properties, but gradually also the extremely important new residential construction." The number of building permits has also increased, and private households have again made the decision to buy residential property more often. It is also positive that politicians have launched initial initiatives for deregulation and acceleration in housing policy. Now it depends on how quickly the reforms are put into practice - and how quickly the municipalities as local decision-makers get involved in these innovations.

Further measures are needed to decisively boost the housing market. "The promotion of the purchase of residential property and state guarantees for companies that create new housing on a large scale have the potential to become real game changers." Bergmann described the idea of a new state housing association at the federal level as an aberration. "Instead of creating a new institution that would have to contend with the same challenges as private actors, the long-discussed regulatory reforms to stimulate the housing market should now finally be implemented consistently and quickly."

"Regulatory turnaround has begun"
The vdp welcomes the fact that voices from politics and supervision have recently been heard more and more frequently, announcing both a reduction in bureaucracy and a simplification or consolidation of regulatory measures. "The first corrections that have been made, for example in the sustainable finance rules, have heralded the regulatory turnaround," said vdp Managing Director Jens Tolckmitt. However, their effect so far is still limited.

"Regulatory requirements are often sprawling, complex and inconsistent."
Jens Tolckmitt

In view of the numerous regulatory requirements, which are often excessive, complex and inconsistent, he stressed: "Banks and borrowers continue to be heavily burdened by excessive regulation. Because it makes loans more expensive."

While Europe continues to strictly implement the Basel III rules, the USA is relaxing its banking regulation and thus deliberately deviating from Basel III. According to the published FED implementation proposal, lower capital requirements and less complex rules are intended to strengthen lending in the USA and promote economic growth there. Depending on the size of the institution, relief of around 5% to just under 8% is planned, the FED announced. Instead, the U.S. is now prioritizing the competitiveness and performance of its banks in the interest of the U.S. economy," Tolckmitt stressed.

He added that there are also deviations from the Basel III regulations in other jurisdictions such as Great Britain and Canada. Against this background, the persistent adherence in Europe to the capital requirements is incomprehensible. "The robustness of the banking system, the good capitalisation and liquidity of European banks have been repeatedly confirmed by politicians and supervisors," said Tolckmitt. Nevertheless, Basel III threatens to impose significant additional burdens on equity of up to 20% by 2032, and even higher in individual cases – remarkably, especially in rather low-risk business areas.

"The output floor must be frozen at its original level of 50%."
Jens Tolckmitt

He made it clear: "The Pfandbrief banks are not calling for a fundamental departure from Basel III, but for targeted adjustments." This is because a sustained ramp-up of capital requirements over another six years as planned would be counterproductive. The vdp is particularly focused on the lower limit for capital requirements for banks: "The output floor must be frozen at its original level of 50% in order to avoid further improper capital burdens." In addition, the Pfandbrief banks are committed to ensuring that demonstrably secure residential real estate loans are permanently privileged and that project developments, so-called ADC financing, which finance, for example, new residential construction and energy-efficient refurbishment, are not burdened with prohibitively high risk weights.

These selective adjustments to the Basel III regulations would increase the performance of the banks and thus facilitate urgently needed investments in housing construction, climate protection and infrastructure, Tolckmitt noted. He suggested a more pragmatic regulatory approach based on the US model: appropriate and risk-based and taking into account the performance of banks. Otherwise, it is to be feared that banking business will migrate even more than before to less regulated areas – a development that is now increasingly being noticed by supervisors after 17 years of one-sided permanent regulation and is being observed with growing concern.

The Pfandbrief banks acknowledge that the EU Commission has followed up on its announcement that it wants to streamline European sustainable finance regulation. The simplification of disclosure was an important first step, Tolckmitt affirmed. But inconsistency between the reporting obligations of the real economy and banking regulation leads to data gaps. In order not to slow down investments – especially in the building stock – the criteria for classifying "green" buildings would have to become much more practical.

"The applicability of the taxonomy criteria in practice must improve noticeably."
Jens Tolckmitt

With regard to the recent consultation on the EU taxonomy, he criticised the fact that the goal of broader application and greater market acceptance of this framework in real estate financing continues to be missed. One of the reasons he cited was that the taxonomy did not take into account data availability and processes in the banking industry.

He called for targeted readjustments to the criteria: "The applicability of the taxonomy in practice must improve noticeably." A central prerequisite is to comply with the implementation deadline for new construction standards (by 2030) provided for in the EU Building Directive (EPBD) and not to bring it forward to 2027. Regulation and audit obligations should be more closely aligned with the principles of materiality and proportionality. From the Pfandbrief banks' point of view, it is also crucial that the taxonomy check can be carried out once at the time of granting the loan on the basis of existing documents such as energy performance certificates or renovation passports.

The Pfandbrief market was once again robust in 2025 and served as a source of funding for vdp member institutions that can be used at all times. Pfandbrief outstanding increased by EUR 11.4 billion or 2.9% to EUR 410.9 billion in the year under review. The outstanding Mortgage Pfandbriefe exceeded the threshold of EUR 300 billion for the first time (EUR 304.1 billion, compared with EUR 298.4 billion in 2024). The outstanding number of public-sector Pfandbriefe also increased: by 5.6% to EUR 106.8 billion.

Pfandbrief sales increased from EUR 57.3 billion to EUR 66.8 billion in 2025, an increase of 16.6%. Both mortgage and public Pfandbriefe contributed to this increase, with sales up 10.1% and 35.1% respectively. With an issue volume of EUR 31 billion, benchmark Pfandbriefe (with volumes of at least EUR 500 million) achieved their third-best sales result in the past ten years.

The development of sustainable Pfandbriefe was divergent: while their issue volume fell from EUR 7.1 billion to EUR 4.7 billion, their outstanding volume rose from EUR 30.5 billion to EUR 33.0 billion. The interest of our member institutions in issuing sustainable Pfandbriefe remains strong. However, there is a lack of cover pools that meet the high demands on the issuance of green and social Pfandbriefe, said Bergmann.

"With an extension of the loan-to-value limit to 80%, the Pfandbrief could develop its potential for residential construction and acquisition even better."
Gero Bergmann

"The Pfandbrief continues to demonstrate its traditional crisis resilience," Bergmann stressed. The product has once again impressively underlined its role as an anchor of stability for Pfandbrief banks and real estate financing. Finally, he announced that the vdp would advocate extending the loan-to-value limit for residential real estate loans to 80% in the upcoming amendment of the Pfandbrief Act – as has long been a reality in many other European countries. This would enable the Pfandbrief to develop its potential for residential construction and housing acquisition even better, he affirmed. "Our goal is to use the amendment to make the Pfandbrief even safer and more attractive in general, to strengthen the competitiveness of German issuers and at the same time to improve the potential for housing financing."

Bergmann was satisfied with the development on the Pfandbrief market at the beginning of 2026, even if the high issue level of the previous year could not be achieved. At EUR 20.8 billion, the volume of Pfandbriefe issued by vdp member institutions in the first three months was 11% below the volume of the exceptionally high-issue period of the previous year.

As in the previous year, the vdp has 52 member companies, which together account for a market share of almost 96% of the total Pfandbrief outstanding. An overview of the member institutes can be found here: https://www.pfandbrief.de/site/de/vdp/verband/mitgliedschaft/mitglieder.html