The Pfandbrief 2011 | 2012
The Pfandbrief 2011 | 2012
The Pfandbrief 2011 | 2012
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<strong>The</strong> fallout of the financial and economic crisis played a considerable part<br />
in the recent success story of the Mortgage <strong>Pfandbrief</strong>, long decried as<br />
boring. In view of the current increase in investors’ risk awareness, however,<br />
the <strong>Pfandbrief</strong> is held in high esteem not just as a sound and favorably<br />
priced refinancing instrument for the issuing financial institutions<br />
but also as an investment product with a stable value. <strong>The</strong> attraction can<br />
be explained not only by the statutory requirements that govern the issuance<br />
of <strong>Pfandbrief</strong>e and the determination of the mortgage lending value<br />
(MLV): particularly in downswing phases, it is above all the sustained<br />
value of the cover pools that convinces. A closer look at the German property<br />
market – by international comparison and in terms of the development<br />
of individual market segments – testifies to the attractiveness of this<br />
debt instrument. After all, German properties account for around 80% of<br />
the cover for Mortgage <strong>Pfandbrief</strong>e.<br />
<strong>The</strong> current trend in transaction activity reflects the appeal of the German property market<br />
beyond Germany’s national borders. Investment volume in 2010 was twice that of the previous<br />
year, and is returning to the level recorded before the exceptional boom years of 2006-2007<br />
as a long-term average. Besides London and Paris, mainly German conurbations are again<br />
attracting more and more foreign investors.<br />
65<br />
Property Transaction Volumes in Germany<br />
70<br />
Investment volume (in € billion)<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
2005 2006 2007 2008 2009 2010<br />
Source: BNP Paribas<br />
What makes direct investment in German properties attractive also benefits, indirectly, the<br />
Mortgage <strong>Pfandbrief</strong> given the high percentage of German collateral in the cover pools for<br />
Mortgage <strong>Pfandbrief</strong>e. Besides the strong economic upswing and the robust labor market,<br />
which appears to have emerged from the crisis virtually unscathed, it is in particular because<br />
of market participants’ re-appraisal of risk-return ratios that Germany is seen in a very positive<br />
light by international comparison.
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