THE POWER OF WE: Bausparen

Transcription

1 THE POWER OF WE: Bausparen Christian Oestreich Head of International Markets 5th Global Housing Finance Conference May 31, 2012, Worldbank, Washington, D.C.

2 THE POWER OF WE 5th GHF Conference THE POWER OF WE May

3 Down payment - key to stable Housing Finance The Golden Rule of housing finance in Germany 60% 1st mortgage Credit for 60% of the purchase price (current value) 20% 2nd mortgage 20% down payments = 100% of the purchase price Bauspar funds = contractually agreed Bauspar sum Bauspar loan for the remaining mortgage Bauspar savings* as basis for down payments * or other savings 5th GHF Conference THE POWER OF WE May

4 Bausparen enables higher down payments and lower credit risks Start Allocation: the total sum (savings + loan) is disbursed Savings: guaranteed fixed interest 1) Savings phase = creation of funds 2) Loan phase = repayment of loan Loan: guaranteed low and fixed interest End t Customers agree on a specific Bauspar sum and save in monthly instalments Once 50% of the Bauspar sum is saved the customer is allocated a loan of another 50% Interest and loan repayments will be made in monthly instalments 50 TUSD + 50 TUSD = 100 TUSD in total is disbursed 5th GHF Conference THE POWER OF WE May

5 Bausparen lower credit risks although 2nd rank Down payment is a risk buffer in the case of decreasing real estate prices Fixed Interest rates and constant instalments for the whole maturity Clients become predictable borrowers Pay back period of the loan app years Client history is transparent NPLs on a normal level but high recovery ratios Low default rates as a result 5th GHF Conference THE POWER OF WE May

6 Bauspar regulation ring-fences the whole Bauspar system Special financial institutions - legally independent Restricted in their investment possibilities Restricted in their business activities - e.g. no investment banking activities Bauspar savings Bauspar loans 5th GHF Conference THE POWER OF WE May

7 Bauspar subsidy is an important system accelerator Bauspar subsidy with positive impact seal from the government Makes saving more attractive New jobs New flats Investing into State securities Educational effect Social stability Bauspar - grant Investment in Housing Tax Political instrument Reduction of expenditure 5th GHF Conference THE POWER OF WE May

8 Level of Bauspar subsidy depends on Housing policy ,8% max. 45 p.p.*) 3% max. 22,50 p.p. 10% max. 66 p.p. 10% max. 80 p.p. ~2% of ~1% of ~8% of ~8% of % max. 230 p.p. 15% max. 100 p.p. 25% max. 250 p.p. 20% max. 340 p.p. ~34% of ~10% of ~51% of ~72% of 5th GHF Conference THE POWER OF WE May

9 Bausparen fuels growth and jobs especially in Housing in billions EURO 1st lever People save more! 2nd lever additional Bauspar Loan Subsidy (8.8% on savings p.a.): app. 400 m EURO potential investments in Housing generates times more in terms of growth and 100 jobs in Housing generate additionally 100 jobs in the economy 5th GHF Conference THE POWER OF WE May

10 Six reasons for Bausparen 1. Bausparen helps develop financial prudence 2. Bausparen enables low interest rates for (also small) loans 3. Bausparen reduces credit risks because of higher down payments 4. Bausparen can be smartly combined with mortgage loans 5. Bausparen mobilizes savings for Housing 6. Bausparen is safe and stabilizes the financial sector 5th GHF Conference THE POWER OF WE May

11 Bausparen THE POWER OF WE A Principle of Solidarity Friedrich Wilhelm Raiffeisen: What is not possible for the individual, is achievable together. (1886) 5th GHF Conference THE POWER OF WE May

12 Thank you for your attention! Christian Oestreich Head of International Markets Bausparkasse Schwäbisch Hall AG Crailsheimer Str. 52 D Schwäbisch Hall Germany Telephone +49 (791) Telefax +49 (791) th GHF Conference THE POWER OF WE May