Contract Savings for Housing (Bausparen) - Basic Design and Regulations -
Bausparen – A Success Story
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Transcript of Bausparen – A Success Story
Bausparen – A Success StoryMobilizing Savings for Housing
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Even during the financial crisis, the
Bauspar system already established in
Germany for decades together with its
stabilizing impact acquitted itself
admirably. For one thing, Bausparenis an instrument for building personal
funds. Bauspar customers have con-
trol over their savings and therefore
require fewer loans. For another, those
customers receive loans at lower, fixed
interest rates. Guaranteed interest
rates contribute to the stability of an
individual’s construction financing
and stabilize the market as a whole.
In addition, the Bauspar system provi-
des a special architecture for safety. In
Germany, this is set down in a special
law, the Bausparkassengesetz or “Bau-spar Institutions Act”, and is monitored
by the German banking regulatory
authorities. Customers' savings ac-
counts and the Bauspar institutions'
loan obligations are protected by law.
This makes Bauspar institutions a ref-
uge of stability in the financial markets –
yesterday, today, and tomorrow.
On the following pages you can read
how Bausparen works, what effects the
economy experiences, and what coun-
tries have successful track records with
Bausparen.
I hope you enjoy your reading and find
it informative.
Schwäbisch Hall, August 2011
Dr. Matthias Metz
Chairman of the Management Board
Bausparkasse Schwäbisch Hall AG
Dr. Matthias MetzVorstandsvorsitzender
Dear Reader,
Many people all over the world harbor
the dream of owning their own home.
Having a dwelling is one of our basic
needs in life, and people go to great
efforts to make this dream come true:
They save, they go into debt, they take
construction and modernization work
into their own hands. For most people,
an investment in their own house or
their own apartment is the largest one
they will make in their lives. Inexpensive
and safe financing instruments are in-
tended to help when taking the risk of
such a large investment.
Bausparen (Contractual Savings for
Housing) is a tried and true model for
success with a long history. After World
War II, they made key contributions to
the reconstruction of our country.
Bausparkasse Schwäbisch Hall has dis-
bursed more than 273 billion euros in
Bauspar funds since 1948, co-financing
the construction, purchase, or moderni-
zation of roughly 7.9 million apartments
and houses.
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Reaching the Goal Faster, Together
How Bausparen Works
Bausparen (Contractual Savings for Housing) constitu-
tes a simple and effective financing system for anyone
who wants to build, buy, or modernize a house or
apartment. Let’s look at the basic principle: Mr. Fox
wants to build. Every year, he can save one tenth of the
total amount he will need. Using this method, he will
need ten years to turn his dream of owning his own
home into a reality. However, if Mr. Fox teams up with
nine friends who also want to build, he will be able to
build after only one year. This is how it works: Mr. Fox
and his friends all deposit their yearly savings payments
into a common fund and issue loans to one another.
This allows Mr. Fox to begin after only one year. To do
so, he uses his own savings that he has deposited and
those of his friends. In the second year, the second
friend can build. He also uses his own savings, those of
his friends, and the first repayment installment from
Mr. Fox. In the third year, the third friend begins, and
so on. On average, all ten friends can begin building
after about five years. The basic idea is delightfully
simple – and this is called Bausparen.
German Bauspar institutions have spent the last few
decades refining the concept of the savings association.
The modern system is no longer limited to a specific
number of people; instead, this has been expanded over
time. Today, all of the savers in the Bauspar association
secure incoming funds. Funds are distributed on the
basis of a mathematical formula that focuses on the
factors of time and money.
Model with two Phases
From the customer’s point of view, the practice of Bau-sparen progresses in two phases: During the savings
period, the customer regularly saves a specific amount,
thereby building up the balance in his Bauspar account.
The loan phase begins with the so-called “allocation”:
The contractually stipulated Bauspar sum is paid out to
the customer. This sum is made up of the balance saved
up by the customer and the Bauspar loan. The customer
makes monthly payments to repay the loan.
This system offers many advantages:
A solid basis: By saving this way, Bauspar customers
build up their personal assets and thus the foundation
for solid housing construction financing. The amount
of the total to be financed stays within tolerable limits.
Not dependent on the capital market: Bausparcustomers' savings are used for the issuance of loans.
This closed system makes it possible to provide low
interest rates on the loans, and customers don’t need
to depend on developments in the capital market.
Fixed interest rates: The interest rates during the
savings period and the loan phase apply for the whole
term, starting from the date the contract is signed.
Bauspar customers also acquire a legal right to the
Bauspar loan once the contract is signed. Consequent-
ly, they already know today what their loan will cost
tomorrow, the day after tomorrow, or in ten years. By
contrast, the interest rate on mortgage loans dependsNearly everyone dreams of having their own four walls.
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on the situation in the capital market, or more precise-
ly, on the interest rate at which the lending institutions
are obtaining financing for themselves. Customers thus
take the risk that the interest rate will go up.
Safe investment: Bausparen is absolutely safe. The
German legislature has created a reliable legal frame-
work that imposes the strictest of regulations on
Bauspar institutions and protects customers’ savings
accounts. Bauspar institutions issue loans exclusively
from the funds they have available. Thanks to this
self-enclosed system, not one Bauspar customer lost
even a cent during the financial crisis.
Flexible products: Bauspar customers can choose
between different rate plans, allowing them to tailor
their housing construction financing to their individual
needs. Many different housing-related dreams can be
financed with Bauspar funds – from the alarm system
to the second garage.
Whether new construction or modernization – Bausparen makes it possible.
How Bausparen Works:
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Impetus for Housing Construction and the Economy
Bausparen Provides Advantages – For State and Society
Having a dwelling is one of humankind’s basic needs.
Providing the population with sufficient housing was
and still is a mission of the state in many countries.
Today, having private investors relieve the state of the
burden of providing housing is more necessary than ever
before. What can a government do in order to mobilize
private capital for housing construction?
One effective and efficient measure is the introduction
of Bausparen (Contractual Savings for Housing). The
sole purpose of Bausparen is to finance housing,
thereby providing direct support for housing policy.
Bausparen promotes the creation and maintenance
of owner-occupied homes. This in turn provides an
essential contribution to asset accumulation as well as
to the social safety net and retirement funding for
large swaths of the population.
Bausparen combines saving and financing into a single
product. Building up savings does give the individual a
certain amount of personal assets, but that’s not all.
There are also elements to saving that have practical
effects on the economy. These curb unbridled consump-
tion and combat inflationary tendencies.
Building personal assets is an important prerequisite
for later acquiring your own home, or renovating or
modernizing a home you already own. People who
save on a regular basis learn to restrain their consump-
tion and, generally speaking, it is easier for them to
repay their loans later. Bausparen is thus educational.
It has been statistically shown that on a yearly basis,
Bauspar customers in Germany save around twice as
much money as those who don’t participate in this kind
of saving. Over the course of their lives, homeowners
in Germany acquire around nine times the amount of
assets that renters do. And Bauspar customers are
more reliable in repaying their loans. In Germany, the
Bausparen leads to building homes – not only does this benefit housing construction, it benefits the entire economy.
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default rate for loans issued by Bauspar institutions is
only a handful per thousand.
Funds issued by Bauspar institutions go directly into
construction investments: In Germany, roughly one third
of Bauspar funds are used to finance new construction
and real estate purchases. Today, the lion’s share of this
flows into new, energy-efficient building projects that
lower operating and heating costs and CO2 emissions.
Nearly two thirds of Bauspar funds are used for renova-
tion, energy-efficient refurbishment, or house and apart-
ment modifications to suit the residents’ age.
The continual flow of Bauspar funds has a stabilizing
effect on the entire economy. Housing construction
creates revenues and jobs for the construction trades,
small firms, mid-sized companies in the construction
industry, as well as independent contractors such as
architects, engineers, structural engineers, and apprai-
sers. In Germany, the construction industry contributed
some 10 percent of the entire gross domestic product
in 2010; around 8 percent of the working population is
employed in the construction industry.
The state profits from a flourishing housing construc-
tion industry as well: More jobs means less government
assistance for the unemployed. In addition there are
higher tax revenues from sales taxes on housing con-
struction revenues as well as payroll and income taxes
on workers employed in the construction industry.
This far outweighs the government’s investment in a
housing construction subsidy.
Government Premium as Incentive for Saving
A government Bauspar premium is of crucial import-
ance for the long-term success of Bausparen – this
enables the state to make Bausparen even more ap-
pealing. For example, a government premium can act to
compensate for inflation. At the same time, the state is
carefully directing the investment of its citizens’ assets
into safe financial products, therefore a government
premium also functions as a seal of approval.
In many countries, Bausparen thus makes a significant
contribution to a sustainable social and economic policy.
The financial crisis has shown that countries with Bau-spar systems weathered the crisis considerably better
than nations without this financing system.
Safety is the Highest Priority
Contrary to other real estate financing options,
Bausparen constitutes by and large a closed
system that is relatively independent of the
fluctuations of the capital market. Customers'
savings are only disbursed to other customers as
loans. Bauspar institutions are prohibited by
law from investing money in risky financial
products. Maximum safety for customers’
savings is a key element of the Bauspar system
philosophy. Bauspar institutions in Germany
are therefore strictly regulated by a banking
law and the supplemental Bauspar Institutions
Act. The latter stipulates strict provisions
concerning the investment options open to
Bauspar institutions, while the issuance of
loans is also subject to strict criteria. So Bau-spar customers’ savings accounts are not only
absolutely safe, but Bauspar institutions’
payment obligations are also backed by a
fluctuation reserve required by law. This
system for ensuring safety proved itself just
recently during the financial crisis.
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Bausparen as an Export Success Story – “Made in Schwäbisch Hall”
The Market Leader for Decades
With 6.8 million customers, Schwäbisch Hall is Germa-
ny’s largest Bauspar institution and the market leader.
Since the company was first established in 1931, it has
been a permanent fixture in the cooperative banking
sector. Its owners include DZ BANK AG of Frankfurt
am Main, which holds 82 percent, WGZ-Bank AG of
Dusseldorf, which holds 15 percent, and some 600
cooperative banks.
The company sells its financial products through the
approximately 1,200 cooperative banks, which with
12,000 business locations form one of the densest
banking services networks in Germany. Moreover,
Schwäbisch Hall has 3,800 of its own sales consultants
working in the field, enabling it to maintain a presence
everywhere in Germany. Together with the 3,200 em-
ployees who work at headquarters, they ensure that
customers receive competent advice and customer
service. Schwäbisch Hall customers hold 7.6 million
Bauspar contracts totaling nearly 250 billion euros.
The company sells almost a million new Bausparcontracts a year worth around 30 billion euros. The
annual volume of private housing construction loan
business is 10 to 15 billion euros. Schwäbisch Hall is
thus one of the largest financiers of residential real
estate in Germany.
Bausparen Proves Successful Internationally
The amendment of the German Bauspar Institutions
Act in 1991 made it possible for Bauspar institutions to
establish affiliated companies in foreign countries. At
the same time that the planned economic systems in
Eastern Europe were collapsing and transitioning to a
market economy, the demand from the citizenry for
ways to finance new housing construction and moder-
nization financing was also rising rapidly. Of course,
the state banks in these countries were not prepared for
private housing construction financing: Loan interest
rates of more than 20% made it impossible for private
individuals to repay loans, while high inflation also put
a damper on household savings behavior. The new
market economies considered Bausparen (Contractual
Savings for Housing) to be an attractive and suitable
system for financing the required investments in
housing construction. As a result, they supported the
Schwäbisch Hall is Germany’s largest Bauspar institution and the market leader.
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Schwäbisch Hall has been establishing affiliated companies in other countries since the beginning of the 1990s.
introduction of this financing system by creating the
underlying legal conditions and introducing a lucrative
government subsidy for Bauspar customers.
Schwäbisch Hall is a Pioneer Abroad
Foreign business is an integral part of corporate strategy.
Today, Schwäbisch Hall has holdings in five Bausparinstitutions in the Czech Republic, Slovakia, Hungary,
Romania, and China. These affiliated companies have a
total of 3.4 million customers with nearly four million
Bauspar contracts and 7,600 employees. Almost all of
the affiliated companies are market leaders in their
countries. Schwäbisch Hall was a pioneer when it came
to exporting German Bausparen. Together with part-
ners, it founded the Bauspar institution Prvá stavebná
sporitel'na, a.s., PSS (“First Savings and Loan”) in
Slovakia as early as 1992. In 1993, the Ceskomoravská
stavební sporitelna, a.s., CMSS (“Bohemian-Moravian
Savings and Loan”) was launched in the Czech Repub-
lic. In Hungary, Schwäbisch Hall introduced the con-
cept of Bausparen with what is today the Fundamenta-
Lakáskassza Lakás-takarékpénztár Zrt. (FLK) in 1997. The
first Bauspar institution in the market in Romania, the
Raiffeisen Banca pentru Locuinte, RBL (“Raiffeisen
Bank for Housing”), opened its doors in June 2004.
The success of Bausparen in Eastern Europe also
kindled interest in China. Together with the China
Construction Bank Corporation, the second largest
bank in China, Schwäbisch Hall established Sino-
German Bausparkasse (SGB) in 2004. The company
has been providing Bausparen in Tianjin, a region on
the east coast with ten million inhabitants, since 2004.
Another region, Chongqing, is intending to follow in
its footsteps soon.
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Slovakia
Uncontested Market Leader
1992 marked a milestone in the history of Bausparkasse
Schwäbisch Hall. This was the year that the company
founded its first foreign subsidiary, Prvá stavebná spori-
tel'ňa, a.s. (PSS), in Slovakia. This is the first Bausparinstitution ever to enter the market in Eastern Europe.
Three strong partner banks are also shareholders of
PSS, Raiffeisen Bausparkasse from Austria, Slovenská
sporitel'ňa savings bank from Slovakia, and Erste Bank
from Austria. PSS manages around 900,000 contracts
with a total savings value of roughly 11.7 billion euros.
In 2010, it handled around 87 percent of all new Bau-spar business, making PSS the uncontested market
leader in Slovakia. In 2010, PSS’ financing volume came
to around 485 million euros. From 1992 to 2010, PSS
provided a total of roughly 6.3 billion euros for housing
construction in Slovakia. This corresponds to 40 per-
cent of all housing construction financing arrangements
during this period and substantiates PSS’ standing as
one of the largest construction financiers in the country.
After the change in the political landscape in 1989, new
construction activities in Slovakia practically ground to
a halt. Even in 2010, with 17,000 completions, Slovakia
was far below the EU average. In the 1990s, the state
also privatized almost all of the housing on hand
throughout the country. A large percentage of these
apartments and houses were in great need of renova-
tion. The Slovakian citizens were thus facing enormous
investment costs. At the same time, the country was
struggling with a high rate of inflation, which reached
a peak of 25 percent in 1993.
For many of the fledgling homeowners, Bausparen(Contractual Savings for Housing) with their reasonable
interest rates proved to be the ideal form of saving and
financing in this situation. When PSS entered the mar-
ket, the interest rate for Bauspar loans was 6 percent,
which was considerably lower than for comparable
loans. This was what made the financing of moderniz-
ation measures and property acquisition affordable for
people from a wide range of socio-economic statuses in
the first place.
Incentive for Bausparen
The government Bauspar premium provided an addi-
tional incentive to save for a home and accelerated
acceptance of the new financial product, which quickly
Largest Housing Construction Financier
PSS has disbursed roughly 6.3 billion euros for housing construction in Slovakia since 1992. With a share of 40 percent of total financing volume, PSS is the largest housing construction financier in Slovakia. Every fourth Slovak has built or modernized using funds from PSS.
PSS' financing volume from 1992 to 2010
¤ 6.3 billion
35 % new construction/
purchase
65 % modernization
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Corporate headquarters Bratislava, SlovakiaYear established 1992Core business Bausparen, construction financingEmployees 1,556Customers 820,000
Prvá stavebná sporitel’na, a.s.developed into the most popular form of saving in
Slovakia. By supporting the saving efforts of indivi-
duals, the legislature mobilized considerable amounts
of capital and fostered the accumulation of personal
assets among its citizens. The burden on the state due
to this government stimulus diminished as the perfor-
mance of the Bauspar institutions improved. While the
Slovakian government was still paying out 110 million
euros in premiums in 2002, this figure decreased to 45
million euros in 2010. During the same period, Slovaki-
an Bauspar institutions increased their disbursements
from 2.5 billion euros (2002) to 8.4 billion euros (2010).
New Product for Associations
Over 90 percent of Slovakian citizens are homeowners.
Construction in the housing industry is therefore focu-
sed on modernizing and renovating homes that already
exist. One particular characteristic of the Slovakian
apartment market is homeowners’ associations, which
became widespread following the wave of privatization
in the 1990s. PSS has developed a special product for
this target group. The homeowners’ association can en-
ter into a Bauspar contract as a legal entity. The housing
collective uses the Bauspar loan to renovate windows,
facades, and roofs, for example. The new product has
been received positively. In 2010, PSS issued housing
construction loans to legal entities in the amount of ap-
proximately 29 million euros.
Nearly Every Other Person is a Bauspar Customer
In the Czech Republic, Bausparen (Contractual Savings
for Housing) has developed into a success story. Today,
4.8 million of the 10.5 million citizens are Bausparcustomers. This means that just 18 years after the intro-
duction of the Bauspar system, almost every other
Czech has a Bauspar contract. Bausparen is especially
popular among young people. 68 percent of Bausparcustomers are between the ages of 15 and 24.
Market Leader in the Czech Republic
Numbering 1.8 million, most Czech Bauspar savers
have chosen to be Ceskomoravská stavební sporitelna,
a.s. (CMSS) customers. The company, established in
1993, is a joint venture of Bausparkasse Schwäbisch
Hall and originally two bank partners, which have
since been merged into one of the Czech Republic’s
major banks, Ceskoslovenská obchodní banka (CSOB).
In 2010, it handled around 51.8 percent of all new busi-
ness, making CMSS the market leader among the five
Czech Bauspar institutions, and one of the four largest
Bauspar institutions in Europe. From the time it was
established to the present, CMSS’ total financing
volume comes to around 10.4 billion euros. That
corresponds to 19 percent of all housing construction
financing arrangements in the Czech Republic during
this period. In 2010 alone, roughly one billion euros
were funneled into housing construction through CMSS.
Modernization Dominates
In the Czech Republic, most Bauspar loans are used
for the purchase of apartments and houses and for
renovation. In 2010, 56 percent of Bauspar loans went
toward the purchase of a house or apartment, 32 per-
cent were used by Czech customers for alterations and
modernization projects.
Over the past few years, CMSS has taken advantage of
its leading position in the Bauspar business to develop
other lines of business such as the placement of retire-
ment planning products, and to offer customers additio-
nal products that meet their needs. This makes CMSS an
attractive partner for other financial services providers in
the Czech Republic. Bausparen has developed into a
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The Czech Republic
Start of the contract Allocation
Approx. 6 years
Government premium with a large impact
An attractive government subsidy, especially at the point when a Bauspar system is introduced, creates key incentives for regular saving. A premium totaling 540 euros generates a Bauspar sum of 5,000 euros. That means that for every one euro of premium invested, there are nine euros for housing construction.
Monthly savings amount 30 euros
Interest on savings 3% annually
Government premium 25%
= 5,000 euros Bauspar sum of which, 540 euros from the government’s Bauspar premium
Model Calculation
kind of national sport in the Czech Republic. The Czech
government is convinced of the benefits of Bausparen,
and since their introduction has for this reason suppor-
ted savers by way of a premium. The government Bau-spar premium is currently 10 percent of savings put aside
out of a maximum 800 euros per year. This means that
Czech Bauspar customers can receive up to 80 euros
annually for their savings in the form of a government
premium, which corresponds to approximately 8 percent
of the average monthly salary.
Bauspar Premium – the Government’sSeal of Approval
Right from the beginning, the Bauspar premium was
a clear political signal. This government subsidy is
perceived as a kind of “seal of approval" for a new type
of financial product. Additionally, the premium provi-
des a strong incentive for citizens to make an effort to
improve their living situation. Bauspar contracts that
are subsidized by the state have to be used for housing-
related financial purposes within a set period of time.
This stipulation allows the government to carefully
direct how the financial assistance is used – all of it
flows into housing construction. In turn, an active
housing construction industry creates new living
space, new jobs, and intensifies demand in other sectors
of the economy, which all results in additional tax
revenues for the state. Juxtaposed against this are the
outlays for the government Bauspar premium. In the
Czech Republic, these created a burden on the natio-
nal budget of about one percent during the first few
years. However, as the performance of the Bausparinstitutions improved, the strain on the national
budget continually declined. Initially, from 2002 to
2006, spending on the government's home construc-
tion premium rose from 351 million euros to 575 million
euros, however in the following years this decreased
to 493 million euros (2010). During the same period,
the Czech Bauspar institutions increased their disbur-
sements by nearly sevenfold, from 3.4 billion euros
(2002) to 22.8 billion euros (2010).
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Corporate headquarters Prague, Czech RepublicYear established 1993Core business Bausparen, construction financing,
retirement planning
Employees 3,458Customers 1.8 million
Ceskomoravská stavební sporitelna, a.s. (CMSS)
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Hungary
A Pillar of Housing Construction Financing
In 1997, Bausparkasse Schwäbisch Hall together with
the Hungarian bank, Takarékbank, established the Hun-
garian-German Bausparkasse Fundamenta. In 2003,
Fundamenta merged with the Lakáskassza, a competitor,
to become the Fundamenta-Lakáskassza Lakás-takarék-
pénztár Zrt. (FLK). Today, FLK is majority owned by
Bausparkasse Schwäbisch Hall and currently manages
over 600,000 contracts with a total savings value of
roughly 4.9 billion euros. Its market share is 61 percent.
During the period from 1997 to 2010, FLK’s financing
volume came to around 300 million euros. FLK is thus
one of the largest providers of housing construction fi-
nancing arrangements in Hungary.
Bausparen Withstands Crisis
Since their establishment, the Hungarian Bausparinstitutions have developed into a key economic factor
in the financing of private home construction. In
particular, they contribute significantly to encouraging
the population to take the initiative. Bausparen(Contractual Savings for Housing) is an individually
tailored product allowing people in Hungary with low
and middle incomes to realize their dream of having
their own four walls. What’s more, the success of
Bausparen in Hungary is in great part due to its ability to
withstand a crisis. The self-enclosed system of Bausparfunds provides for independence from the capital mar-
ket. Additionally, in the interest of their customers, the
business activities of the Bauspar institutions are severe-
ly restricted. For instance, these institutions cannot sell
any foreign currency loans. Just how sensible this is has
been confirmed in Hungary over the last decade and in
particular since the international financial crisis.
Over the last decade, the interest rate level in the local
currency (Hungarian forint) was very high due to the
large amount of new government debt and the limited
financing volume. Domestic private customers frequent-
ly entered into foreign currency loans, which appeared
to be more favorable. As was the case everywhere in the
world, banks were handling the issuance of loans very
generously during this period. The result was increasing
household debt. Today, nearly 64 percent of all private
borrowers have debt in the form of foreign currency
loans, primarily in Swiss francs. In 2011, the Swiss franc
has strengthened against the Hungarian forint by almost
50 percent. This means that the burden on builders to
meet their monthly interest and principal repayments
has also increased significantly. Some 150,000 private
households – around 4 percent – can no longer service
their loans in conformity with the contract. This situ-
ation will continue to weigh on personal consumption
Bausparen
Interest rate security and independence from the capital market
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
10 %
3.9 %
6 %
Capital market interest rate1
Bauspar loan interest rate2
1 average effective interest rate on housing construction loans in HUF2 most favorable effective Bauspar loan interest rate from FLKSource: H. J. Dübel: Wohnungsbauförderung in Mitteleuropa, (“Housing Construction Subsidies in Central Europe”),Vienna 2004; Fundamenta-Lakáskassza
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15
10
5
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Corporate headquarters Budapest, HungaryYear established 1997Core business Bausparen, construction financing,
retirement planningEmployees 1,230Customers 540,000
Fundamenta-Lakáskassza Lakás-takarékpénztár Zrt. (FLK)
in Hungary for many years. Consequently, Hungarian
banks have tightened their lending policy considerably.
Today, only around one quarter of the former volume
of new lending business is accepted.
Favorable Interest Rates on Loans
Now in particular, Hungarian Bauspar institutions
are able to demonstrate their financing strength. Their
customers are enjoying very favorable interest rates.
For example, FLK is currently offering interest rates on
loans starting as low as 3.9 percent annually. The com-
parable interest rate for alternative housing construc-
tion loans is nearly 10 percent. Consequently, FLK’s
share of new business for private housing construction
loans has increased from 8 percent to 18 percent. It is
already inevitable that FLK will more than double its
new loan business in comparison to 2010.
Financing Community Projects
The Hungarian Bauspar institutions also make an
important contribution to the financing of community
projects. As a rule, communities are not in a position
to make the necessary investments under their own
authority. In this situation, the Bauspar institutions
offer a model with which the residents can enter into
earmarked Bauspar contracts in their own names.
They receive interest on the funds in their Bausparaccounts as well as the government’s Bausparpremium. After several years, these funds flow into
community projects together with EU subsidies and
the communities’ loans. Without this model, several
communities would not have been able to make even
the most necessary of investments today.
During the crisis, the Hungarian Bauspar institutions
proved that they have a stabilizing effect on housing
construction financing and on the entire economy.
Today everyone agrees that Bauspar institutions are one
of the most important pillars of housing construction
and community financing in Hungary.
Bausparen Extends Beyond Europe’s Borders
Searching for new options for financing housing con-
struction, even the People’s Republic of China started
to take notice of the German Bauspar system. After a
preparatory period lasting several years, Schwäbisch
Hall together with the second largest Chinese bank,
China Construction Bank Corporation, founded Sino-
German Bausparkasse (SGB). In February 2004, the
first Chinese-German Bauspar institution opened its
doors for business in Tianjin Province, 140 kilometers
southeast of Beijing.
Characteristics specific to China play an even stronger
role here than in other countries where Bausparkasse
Schwäbisch Hall has established joint ventures. One of
the most important factors is the country’s rapid urba-
nization. By the year 2030, the number of city residents
will rise from the current figure of 600 million to one
billion people. By 2020, the number of cities with more
than a quarter million middle class residents will triple
from 88 to 279. In addition to urbanization, the decli-
ning birth rate is another reason for the trend toward
small families or single-person households. On aver-
age, only 3.1 people live in a Chinese household. Ten
years ago that figure was still 3.4. Consequently, the
demand for living space will continue to rise – and
with it the opportunities for growth in housing con-
struction financing.
New Construction Booming in Growth Regions
Because the Chinese government regulates land use,
multi-story buildings are being constructed almost ex-
clusively in China’s growth regions. Modernization
projects play no role. Old structures are pulled down
and replaced with new buildings.
Home ownership is also extremely significant from a
cultural perspective. For the Chinese, having their own
1616
China
i
Multi-story buildings dominate the cityscape in growth regions.
apartment is one of their goals in life, even more so than
in Germany. For people in China who have money to
invest, purchasing an apartment is at the top of the list.
Home ownership is even a generally accepted require-
ment for getting married.
Government Relies on Public Housing Construction
Recently, these factors have led to steeply rising real
estate prices – with the result that it is nearly impossible
for the average urban wage earner to pay for their own
home. The Chinese government is attempting to coun-
teract this problem, also to prevent real estate specula-
tion. For example, there has been a five-year speculation
limit in place for real estate sales since 2010. Addi-
tionally, in the case of private financing arrangements, a
larger down payment must be made to increase equity.
Another measure is the subsidizing of public housing
construction. The Chinese government has openly
stated that its goal is to make home ownership afford-
able for middle and also lower income groups. For
example, important target groups include young fami-
lies in cities and people who have traveled there to
work. In 2010 alone, some 5.8 million public housing
units were built. Over the next few years, another 40
million units are planned.
SGB Successfully Expands its Business Model
SGB has taken this development into account and ex-
panded its business model. It has been offering supple-
mental private mortgage loans and property financing
arrangements since 2007, primarily in the context of
public housing construction. The focus is on the middle
and low price segment. The unit sizes of the properties
being financed is between 50 and 150 square meters. At
the end of 2010, SGB had private mortgage loans for
209 million euros and property financing arrangements
for 522 million euros in its portfolio. Classic Bausparbusiness has also experienced increasingly positive
development in China. With total Bausparen (Con-
tractual Savings for Housing) of 458 million euros in
2010, SGB generated the second best new business
results since it first opened its doors.
Market Entry in the Megacity of Chongqing
Bausparen still has high potential for growth in China.
The combination of Bausparen, mortgages, and proper-
ty financing arrangements has proven successful in
Tianjin. Additionally, government representatives from
other growth regions have been displaying interest in
Bausparen based on the German model. The expansion
of activities in China is thus a foregone conclusion. SGB
is currently laying the foundations for entering the mar-
ket in Chongqing, one of the most dynamic cities in
China. 29 million residents live here, of those 5 million
in the city proper, 10 million in the suburbs, and 14 mil-
lion in the rural areas economically connected to the city.
1717
Corporate headquarters Tianjin, ChinaYear established 2004Core business Bausparen, mortgage loans,
property financing
Employees 1,105Customers 76,800
Sino-German Bausparkasse (SGB)
18
Romania
Strong Partners
In 2004, Raiffeisen Banca pentru Locuinţe S.A. (RBL)
was the first Bauspar institution to start up operations
in Romania. It is the newest of Bausparkasse Schwä-
bisch Hall’s five foreign affiliates in total. Two other
companies also have a stake in the Romanian joint
venture Bauspar institution: The Austrian Raiffeisen
Bausparkasse also participated in founding PSS in
Slovakia and today is a reliable business partner for
Schwäbisch Hall. In addition, the Romanian Raiffeisen
Bank also holds shares of RBL, applying its sales ex-
pertise to provide the representation required locally.
Market with Potential
Fundamentally, the Romanian market offers potential
for Bausparen (Contractual Savings for Housing). Fol-
lowing the change in the political landscape in 1989, the
Romanian government privatized a large portion of the
public rental apartments. Home ownership shot up to
over 90 percent. However, the houses and apartments
are generally in need of renovation and modernization.
Around 50 percent of the residential units have deficient
bathroom plumbing. Additionally, many Romanian
families live in cramped living conditions. The average
household, with just about 3 people, is larger than in a
comparison with the EU (2.4 people). At about 20 square
meters, the average floor space per capita is also well
below the EU average (approximately 35 square meters).
Modernization projects, alterations, and residential
additions in particular can be safely and inexpensively
financed via Bausparen. Investments are being made at
present primarily in energy-saving projects, also in order
to decrease related building costs.
Bausparen can perform an important task for the
Romanian government: While the citizens’ enormous,
pent-up demand primarily for consumer goods came
to the fore in the years following the political and
economic upheaval, saving for the future now needs
to become more firmly entrenched.
Corporate headquarters Bucharest, RomaniaYear established 2004Core business Bausparen, construction financingEmployees 63 (not including field staff)Customers 131,500
Raiffeisen Banca pentru Locuinţe (RBL)
The formula: Move large sections of the Romanian
populace out of rapid consumption and into long-term
asset accumulation.
A Short History of Bausparen (Contractual Savings for Housing)
200 BC Non-profit mutual savings societies (“Li-Wi”) are developed in China during the Han dynasty.
1775 The first Bauspar institution is founded in Birmingham, England, while others follow decades later in
the US (1831), in Australia and New Zealand (1832), in South Africa (1833), and in Brazil (1834).
1885 The first German Bausparkasse für Jedermann (“Bauspar Institution for Everyone”) is founded by
Pastor Friedrich von Bodelschwingh. Gradually, settlers join together to create a number of smaller,
sometimes regionally restricted Bau- und Sparvereine (“Building and Savings Associations”), which
function according to cooperative society principles.
1921 Following World War I, Germany suffers from a major housing shortage. Interest rates of 60 percent
on home loans are not uncommon. Other Bauspar institutions gradually emerge, which still function
today according to the cooperative banking principles applied then.
1931 Bausparkasse Schwäbisch Hall is established in Cologne as “Deutscher Bausparer AG, Bau-, Spar-und Entschuldungskasse”. At the end of the 1930s, the first fundamental change to the German
Bauspar system takes place. The “random drawing system” used up to this point for disbursing
Bauspar funds is replaced by a mathematical assessment process.
1934 Tax advantages are provided for Bauspar contracts for the first time in Germany.
1948 Following currency reform in West Germany, the beginning of the German “economic miracle”
heralds an upswing for German Bauspar institutions.
1952 The government supplements its support of Bausparen with the Wohnungsbau-Prämiengesetz(“Housing Bonus Act”). Bauspar customers receive a government subsidy for their deposits. The ob-
jective is the accumulation of personal assets for a particular goal and simultaneously the acquisition
of a Bauspar loan that is independent of the capital market and has a favorable interest rate.
1973 The Bauspar Institutions Act and the Bauspar Institutions Ordinance go into effect. These create a
uniform statutory foundation for the business dealings of all Bauspar institutions.
1991 Following the amendment of the Bauspar Institutions Act, Bauspar institutions are also able to start
operations in other countries. A comprehensive system to ensure the safety of Bausparen is created.
1992 The first Bauspar institutions in Eastern Europe are formed in Slovakia and the Czech Republic in
1993. Bausparkasse Schwäbisch Hall plays a crucial role in their establishment.
2004 Bausparen returns to China. Sino-German Bausparkasse is launched in the Chinese province of
Tianjin at the initiative of Bausparkasse Schwäbisch Hall.
2008 Bauspar institutions come through the international financial crisis completely unscathed.
The system created in 1991 to ensure safety passes its greatest test.
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2001
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Bausparkasse Schwäbisch Hall AGInternational DepartmentCrailsheimer Straße 5274523 Schwäbisch HallGERMANYPhone +49 791 46-3706E-mail: [email protected]
www.schwaebisch-hall.de