The German Financial Stability Committee (FSC) regularly assesses risks in the German financial system and the adequacy of macroprudential measures.

Vulnerabilities in the German residential real estate market have eased in an orderly manner but have not yet completely dissolved. In light of the changed risk environment, the FSC welcomes the decision of the Federal Financial Supervisory Authority (BaFin) to reduce the sectoral systemic risk buffer on loans secured by residential real estate (sSyRB) from 2% to 1% as of May 1, 2025.

Compared with the previous year, residential real estate prices have increased moderately. Previously, prices had fallen significantly. Overvaluations of residential real estate in Germany were largely eliminated last year. Since the beginning of 2024, new lending for residential real estate has increased. Available information indicates that banks’ lending standards have not eased significantly recently.

Given trade and geopolitical tensions, the current economic weakness and structural changes in the German economy, uncertainty around the outlook for the so far robust labour market remains. Vulnerabilities due to residential real estate loans which were granted in the years around the peak of the house price cycle, partly on the basis of overvalued collateral, persist. Defaults of residential real estate loans could therefore rise in the future.

The German FSC will continue to monitor developments in the residential real estate market. If necessary, the FSC can recommend that the measures be adjusted flexibly to a change in the risk situation.

The overall risk environment remains challenging. The macro-financial environment continues to be characterized by high uncertainty and elevated cyclical risks. The resilience of the German banking sector should be maintained. The German FSC therefore considers that the countercyclical capital buffer (CCyB) of 0.75% remains appropriate.

Here you can find an overview of all FSC Communication.