German investors and seniors realise value of equity release

The concept of equity release to unlock Capital tied up in their single family homes is still relatively new in Germany among both homeowners and the investing public generally.

Company GNIW was founded about five years ago to focus on equity release, of which there are several forms in Germany, explains the company’s Co-CEO Sascha Lohfink. These include sale and leaseback, partial purchase, live annuities and reverse mortgages.

“The idea of GNIW came from the fact that we wanted to create a fair, transparent and above all simple model to monetise property without the former owners having to move out, thereby creating a win-win situation,” Lohfink told Real Asset Insight’s Richard Betts.

GNIW is the market leader in the sale and leaseback space, he said. “We have created a way to buy residential real estate at the value of an occupied property, meaning it’s about 25% to 30% below the vacant market value thus freeing up liquidity for homeowners.”

The former homeowner pays a market rent plus usual monthly charges and can continue to occupy their home as tenants for as long as they want”

Residents are guaranteed security, important to older people, but can give notice to move out at any time.

Historically, people in Germany relocate less frequently during their working life than those in the US or UK which means that they are more emotionally attached to their home.

“But step by step German homeowners are beginning to understand the benefits of equity release products which are so common in the US and UK,” Lohfink said.

There are about 7 million people over the age of 65 who live in their own property whether houses or apartments, corresponding to a possible purchase volume of about €380 billion a figure not lost on investors who can see the potential

“Based on our recent speed of acquisitions we consider ourselves to be the largest landlord of single-family homes in Germany today,” he said.

GNIW is now building up a sizeable holding of single-family homes for rent, thus creating investable product for institutional investors which was not there before.

“It’s an asset category that has been growing in popularity in the US and the UK and elsewhere over the last couple of years and it’s much more mature over there.”

The current market environment and increasing interest rates have made GNIW very selective but prices have started to stabilise which will help the business.

When conditions allow further scaling up the company plans to acquire property worth more than a three-digit million sum in a 12 month period.

Please click on the video above to watch the full interview or listen to the podcast below.