Older Germans eager to boost pensions with equity release

There is an increasing pension gap in Germany which has been highlighted by the current volatility in the markets. This has created demand among pension-age people for an equity release model in order to provide access to the capital tied up in owner occupied housing.

So says Sabine Nass, CEO of the company Deutsche Teilkauf which aims to address this demand.

“We’ve created a product for roughly 7 million elderly people in Germany who all face the same challenge which is that 70% of their net wealth is in their property,” the Nass explained.

“We needed to create a product which enabled them to get financial freedom and access that part of the pension pot that they’ve created throughout their career,” Nass told Real Asset Insight’s Richard Betts.

Deutsche Teilkauf offers to acquire up to half of a customer’s house in order to provide liquidity.

“We own half of the house. We are not moving in with them and they have the right to use the property and we secure this right in the land register,” she said, adding that there is full transparency.

Nass said that there is huge demand for the new product.

“We are a relatively young tech start-up company. “We’ve only been here for two years but we’ve acquired more than a thousand houses in the German market already, and that shows quite frankly the demand but also the way we have positioned ourselves to scale up the product,” Nass said.

Nass said the market in Germany has potential to be worth €300 billion and so far only two to three billion has been realised.

“The UK Market is obviously much more advanced and is the equivalent of over €5 billion per year,” she said. “In Germany we have to do some catching up but I’m very confident that we will get there in no time,” she said.

“We have a lot of baby boomers now reaching retirement age so they would like to benefit from the pension that they have invested and hence we will see a lot of transactions coming to the market.”

She added that the German residential market always provided an excellent risk-return profile, demonstrated in the rise of the giant multi-family companies such as Vonovia and Deutsche Wohnen which has been fuelled by capital market investors looking to invest in what is an attractive asset class.

“The German single-family home market so far has not been structured and institutionally tapped,” she added, but Deutsche Teilkauf provides a platform that allows institutional investors to invest in what Nass describes as an attractive and resilient market.

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