Bausparen A system invented in Baden-Württemberg and ......If every potential home owner saves only...

Université Paris 1 Panthéon-Sorbonne

Séminaire „Contrôle – Audit – Finance“

Bausparen – A system invented in

Baden-Württemberg and exported to

Europe and the world

Stuttgart, May 8th 2014

Jens Kuderer, LL.M.

Jens Kuderer, LL.M. // Stuttgart, May 8th 2014 Arbeitsgemeinschaft Baden-Württembergischer Bausparkassen

The Arbeitsgemeinschaft Baden-Württembergischer Bausparkassen is concerned with issues directly or indirectly relevant for home ownership as an element for stable asset accumulation, retirement provision and social stability

Bausparkasse

Schwäbisch Hall AG

Deutsche Bausparkasse

Badenia AG

LBS Landesbausparkasse

Baden-Württemberg

Wüstenrot

Bausparkasse AG

ARGE-institutions

Other private

Bauspar-institutions

Other public

Bauspar-institutions

19,4%

29,3%

51,3%

Members of the Arbeitsgemeinschaft

Baden-Württembergischer Bausparkassen (ARGE)

The institutions forming the ARGE represent more than

50 % of the German bauspar-market and employ about

10.000 members of staff in Baden-Württemberg

The Arbeitsgemeinschaft Baden-Württembergischer

Bausparkassen

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Net-new business

production 2012


Bausparen and home owner ship are important factors of

private assets and financial precautions

Seite 3

Percentage of home ownership

Number of Bauspar-contracts

Bauspar-amount per capital

Average Bauspar-amount

per new contract

Germany

Baden-Württemberg

Germany

Baden-Württemberg

Germany

Baden-Württemberg

46 % of all apartments1

53 % of all apartments2

443 of 1.000 inhabitants4

9.830 Euro 3

13.300 Euro 4

367 of 1.000 inhabitants3

Germany

Baden-Württemberg

32.320 Euro 3

37.600 Euro 4

Bausparen is a significant element of private financial capabilities in Germany

Quellen: 1 Stat. Bundesamt 2 Stat.Landesamt 3 Bundesverbände

Bausparkassen 4 ARGE

Home ownership is propably the widest spread and socially best

balanced form of wealth in Germany. This is the result of a well

established financial culture which doesn‘t look for „quick wins“ but

is aimed at long lasting and stable values


If every potential home owner saves only for his own house,

it takes each of them ten years, until they have enough

money to built it

Ten potential home owners, each of them

is able to save 10,000 € p.a.

Costs for one house

are 100,000 €

Saving for an house takes time…

Example:

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The 1st one can buy or

build a house by drawing

on the savings of the

other nine

Year 1

All of them are able to buy or

build their houses by using this

system, 4.5 years earlier on

average as if each had saved

the necessary money alone

Year 10

The 2nd one can realise his

house by drawing on the

savings of eight plus the

redemption payments made by

the first one

Year 2

Potential home owners pool their money in a common fund

The basic Idea: help for self-help

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Example:


Self enclosed system

Deposits of the Bauspar customers

Deposit interests paid by the Bauspar institution

Repayment amounts of those Bauspar

customers, who have already obtained

a loan

Possibly Government subsidy (premium)

All deposits and repayments made flow

into one fund from which in turn new

loans are issued

Bausparen: A self enclosed system

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Bauspar

Customers

Govermental

premium

Loan

repayments

Interests obtained

Funds in Bauspar account

Guarantees sustainability

and independence


Deposit

Loan

Fin

ancia

l ta

rget

(Bauspar-

am

oun

t)

Savings period Allotment Loan period

The architecture of a Bauspar-contract

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generally about 40 % generally about 60 %


1924 Foundation of the first Bauspar-institution, the “Bausparkasse der Gemeinschaft der

Freunde Wüstenrot” in Baden-Württemberg

Till 1931 Founding phase of the majority of German Bauspar-institutions

1991 Amendment of the Bauspar Institutions Act allows operations in other countries

Drawing of the Bauspar-

customers who will get the

money to build their houses

(allotment) in the 1920‘s in

Wüstenrot

About 90 years ago the first Bausparkasse was founded

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Seite 9 24.06.2015

TB = Tilgungsbeitrag

D = Differenz Bausparsumme / Bausparguthaben

ZF = Zinsfaktor

SHS = Summe Habensalden

G = Bausparguthaben

Today a allotment is calculated using a mathematical assessment process

Relevant for the allotment is to reach the „Bewertungszahl“ (evaluation figure)

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Calculation of the Bewertungszahl (BZ):

BZ =

200 x TB

D / 1000 + ZF x D x D / (SHS + 3 x G)


22 Bauspar-institutions

12

private

institutions

operate all

over Germany

legally

indipendent

institutions

10

public

institutions

operate in

regionally

defined

markets

institutions

incorporated

under public

law or in public

ownership

30 mill contracts

824 bn € Bauspar-amount

33 bn € payment of building

capital (deposits and loans)

in 2012

The average Bauspar-amount

is 30,000 – 40,000 €

Bausparen today (in Germany)

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Countries in Europe already

working with the Bauspar-system

Germany

Austria

Slovakia

Czech Republic

Hungary

Romania

Slovenia

Croatia

Luxemburg

Belgium (special conditions)

First steps

India

China

Kazakhstan

Interested

Russia

Peru

Ecuador

Chile

Vietnam

Thailand

Chile

Switzerland

Bausparen today (worldwide)

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US-Loans Bausparen

100 % mortgage

+ up to 20 % on top

Conservative mortgage limit

(usually 80 %)

No equity required Equity required

Volatile interest rates Fixed mortgage interest rate till the

loan is paid back completely

Customers without sustainable

financial capability get loans

The customer has proven his financial

capability during the savings phase

Low requirements on the solvency of

the institutions

Governmental supervision and strong

restrictments

Differences between the US-Loan system and the Bauspar -system

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Bausparen is more than buying or building houses:

Accumulation of capital assets

Securing the value of wealth by investing in

real estate, especially in times of inflation

Energy efficient refurbishment

Retirement provisions by

Owning a house (no costs for rent)

„Wohnriester/Eigenheimrente“ – Bauspar-contracts

with governmental incentives especially for private

pension provisons

Additional income from rent

Bildungssparen – Using the Bauspar-contract to finance academic studies

(in Austria only)

Market opportunities

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However, the Bauspar-regulations limit the usage of Bauspar-

contracts to certain purposes usually related to housing (e.g.

Bauspar-loans can’t be used to purchase a car or for travelling)


1

7

15

21

23

25

30

36

37

42

55

0 10 20 30 40 50 60

Other forms of saving

Securities

Stocks

Investment funds

Riester retirement plans

Real Estate

Temporary investments

Life insurances

Bauspar contracts

Savings on giro accounts

Bank deposits (longtime savings)

Funds of German citizens 2013

Bauspar-contracts belong to the most popular financial investments

Quelle: Prof. Dr. Christian Klein, University of Kassel

tns Infratest; Verband der privaten Bausparkassen


Realkreditinstitute

(mortgage banks)

3 %

Bauspar-institutions are number two in house financing

Source:Verband der privaten Bausparkassen;

Other associatons; Prof. Mechthild Schrooten, University of Bremen

Sparkassen

(public saving banks)

34 %

Bausparkassen

(Bauspar-institutions)

23 %

Kreditbanken

(commercial banks)

18 %

Genossenschaftsbanken

(cooperative banks)

17 %

4 %

1 %

Landesbanken

(state banks)

Lebensversicherungen

(life insurance companies)

Marketshare for house-financing 2012


One can‘t ecpect low risk and high returns simultaneously

Convention:

The higher the return,

the higher the risk

respectively

The lower the risk,

the lower the return

1. Loan and Bauspar-contract

2. Real-estate-credit

3. Loan and stocks

μ

(chance/return)

σ

(risk)

1

2

3

Source: Prof. Dr. Christian Klein,

University of Kassel


Any questions?

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