Hypoport SE

XETRA:HYQ

Earnings Call Transcript 2022-Q3

[Operator]

Dear ladies and gentlemen welcome to the Webcast Results Q3 2022 of Hypoport SE. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Ronald Slabke, who will lead you through the conference. Please go ahead.

[Ronald Slabke, executive]

Welcome from my side as well to the presentation of the Q3 results. As you know, we are operating in 3 core industries here in Germany, credit, real estate and insurance. And especially in the world between credit and real estate, they happened a lot in the last quarter, so a lot to talk about. But first of all, let's look on the total group, we see that Hypoport is growing over a period of the last 9 months. We had the net growth. And when you look in the third quarter and see how our market shares in the different industry develop, we keep digitalizing these 2 industries when markets are down, then just our numbers are coming down slightly as well. We can't change how the market looks like right now. how our total numbers look like.

Revenue is up still double-digit when you look on the 3 quarters behind us, profitability stable compared to last year for now. And when you look at the different segments, we saw a double-digit growth in the credit world compared with the market, which is -- then you just look on the figures of BunsbankFlet. Buspak is happy to date -- so let's say, we are certain that we took market share even in our Private Client division where we are at plus 5% in this comparison. Take into consideration that all the references slightly delayed. Yes, property finance or real estate property platform, plus 16% in revenue compared to the market of minus 6% based on Gabos. We expect Gabos to correct this down as well. I don't see that they expect that this changes in the second half of the year.

And good news, insurance, plus 25% from our side in a stable market environment that this market is really stable. It stays stable. Premium volume plus 1%. -- as always, a secure market environment and something that gives us some baseline here right now. Okay. I said a lot about markets already that something is going on. Most of you will be aware of this. Just have a look together on the numbers. German residential mortgage volume based on Bonus Bank in the last 15 years. You can see for a period until 2015, it was pretty stable around EUR 45 billion to EUR 15 billion per quarter. From there, we grew to, let's say, a level of EUR 70 million, EUR 75 billion, thanks to increasing property prices here in Germany.

Parallel, we saw a decline in transactions. So this was not the market was going hot, especially German residential. They are not used to this price development and they didn't buy, so the market slowed down until beginning of this year. And when interest rates start to rise, we saw some additional volume in the market. Sales cycles got short. We peaked with the transaction volume or market -- a new mortgage volume at above EUR 80 billion in the first quarter. And since then, saw a decline, which this market never saw in the last 25 years. So current figures of Bonus Bank sales for the third quarter, we were roughly at EUR 55 billion. This is delayed because the reports of banks to Bonus Bank happens pretty late in the process.

When we look on the market, we would say third quarter was below or on the level of the financial crisis in 2009, roughly. So a really special market environment, you can say, a black swan, something unusual for the German residential mortgage market in general. So how we got here Yes. First of all, and you are aware of this worldwide, we saw a rise in inflation since more than a year now. And with the big inflation rate now in Germany from above 8%. This is a historical not documented area for Germany. Lately, ECB reacted on this and started to increase the short-term interest rate.

Already before this, you can say, since the beginning of the year, markets reacted and changed the long-term interest rate is resulting in a heavy change as well in the cost of mortgages in Germany because the German buyers, homeowners tend to refinance 10 years plus fixed rate interest rate mortgages. So they are heavily linked to the long-term interest rate in Europe and Germany. So Bond 10 years bond is a typical compare for us. And with the increase in the bond markets of the interest rates, the mortgage market went up as well.

From 1% to 4%, it means for the typical homeowner that there are rate -- the monthly payment roughly doubled. And this is -- this had a heavy impact on the affordability of homes. So everything that you could afford a couple of weeks ago, you couldn't have thought anymore a couple of weeks later. So in today's perspective, the property you dreamed of buying a year ago, you can't afford today anymore. And so this leads already a lot of seeker's potential buyers to reconsider their decision and wait for a better environment.

That environment is a lot of hope in this and I tend to call it speculation. So the buyer side hopes for a sharp decline in prices, something you often read in newspapers for the last roughly 7 years now that German property prices are inflated by 15% to 30%. -- you'll read the same today. And the buyer side hopes now that the prices fast comes down so that the need let's say, that get affordable to buy more or less the same property that you could have bought a year ago. In reality, we saw prices peaking in April. And since then, they came down roughly by 3% by now. So a steady, small declining of prices in average overall Germany, we have regions where it's a little bit topped a little bit more ready.

We have stable regions here like Berlin in the pricing. But overall, a 3% decline. So the hope of buyers in the last months that prices will decline sharp didn't realize. And so family such as seekers are tend to wait for a better opportunity. This is a core reason as well why this market is right now in a dysfunctional situation. Because on the other side, the seller side, the owners of properties look on the inflation, and I think that just waiting will bring their prices up with an extremely high inflation rate right now, plus the cost of constructing a home went up between 15% to 20% last year-over-year.

Every brick you own gets fast more valuable. And so the seller side is maybe a little bit irrational, but expect prices to fast come back to the level we saw in April and even exits. So they are waiting. And in this deadlock situation, we see a sharp drop in transactions.

Another part of the market is new constructions as well sharp decline. I can go already the next slide here. When we look on the Euro-based figures, we can see that year-over-year, new constructions are down by 50%. And when you look on the historic level of construction here in Germany, you can say that for a long time, we were around 150,000 to 200,000 units in Germany. Then it took us 10 years to ramp up the production of new homes to 300,000 units, which we reached the last 2 years. And now with this decline of 50% to again, our expectation for next year, 150,000 units. We see that the long , let's say, the long ramp-up phase to finally get enough homes ready for all the migration that we see.

All the sharp increase in households, which we see here in Germany is again back to a depressing level because we need 400,000 units to be finished every year to just stabilize this market. And with a production of 150,000 only per year, it's far below what is needed to compensate the net migration to Germany because of the lead need of our labor market. So -- and this as well gives some hope for the seller side. So the decline in construction will stabilize this market and will make sure that the house prices doesn't come down as fast and as far as the Zika site is hoping for right now. This all in an environment where we look into an upcoming recession, it's still not clear if it's a mile one or a harder one.

It depends a lot from the energy prices, which came down lately a lot. So it will be interesting to see how rough the situation will be, but to make to make this clear, it's not that German households don't buy because of an upcoming recession. They are not buying because of the hope of lower prices and the inability to fast adjust they are let's say, what they are seeking for to their affordability level. So the better choice in our opinion would be to just buy a smaller or a cheaper apartment than date for a chance that prices come down. We don't expect this to happen. We expected maximum 10%. We expect maximum a decline of 10% in property values. And from there, we will increase again. And again, a lot of people miss the chance to release the rating market and acquire a home.

By the way, renting market as a very special situation here in Germany. We have a high rent regulation. So it's difficult to increase rent of existing rents. And you can't terminate the rent contract with Infinite. And with this, it really gets difficult for investors to acquire properties and rent, especially when the rent is in the property already. So the renting market under conditions is effectively shrinking. There's not a lot of new supply coming to the renting market. If you want to change your home and you have to leave an existing renting apartment, the chance to find a similar expensive new apartment is extremely low.

So the pressure in this market, which is constantly increasing because of trigger events and families take that means you want to move together, you get children or you want to split. Does this trigger events, there is a rising pressure in the market and the only chance to really solve this problem, especially in metropolitan areas is by acquiring a home now, you don't have a chance anymore to rent something this market dried out Okay. That's the situation for now. Looking on the performance of the different units in this market environment. We start as always the credit platform, Hepac with their core product mortgages in the center, and we are moving via personal loans to this corporate finance business of from capital and funding for later.

So mortgage volume on Europe up 4% for the first 9 months, down 70% slightly double-digit when you just look on the third quarter, the method slowdown compared to the last year because of the market environment in the third quarter. So this sharp decline in market volume of something around 30% and partially and 50% in new construction is something that we feel in our numbers where we can't decouple from the market.

Even when we expect to take market share right now, thanks to the fact that mortgage brokers and price comparisons, what their core offering is something which gets much more expensive, much more interesting, and important again for consumers. -- pale development in this interest-saving product, Boston here in Germany. We see there are quite an impressive rally in the market, plus 17% up this volume on our PACE plus 10%. In Europac, Boston usually sold together with a mortgage product and secured the interest rate after this mortgage product entered its period.

That's why not as fast-growing as the market because in a market that is as well sold just as a saving product to optionally use it in the future for mortgage, so not linked to a direct mortgage financing right now and a lot of consumers try to secure the current interest rate for a future buying in 10 to 20 years and are using this Boston right now for this. When we look on the different sales channels. In third quarter, we expect that brokers took market share from bank branches again. We expect this because consumers -- the consumers who are seeking a mortgage right now are much more sensitive regarding rates.

We see this in our own dog channel that the advice process takes longer, and we are talking much longer about affordability and the effective rate of the products. While in the Corporate Bank and savings pens world, we see a certain slowdown on activity on our platform, and we expect that a similar slowdown is going on in the branches -- there are some reports -- especially from some heads of saving bank organization in certain regions that since September, they don't see any mortgage business in their branches anymore whatever this means in numbers.

So this -- it's not public, but we expect that in this heavily slowed down market, especially banks with traditional sales approach are under stress. For us, for the first 3 quarters, it still means our numbers and both sectors are up. We are gaining market share there. This is certain. We just are in the current environment, a little bit uncertain how high our structural gain is, how much market share have we taken.

So our next product, personal loan business, something which slowed down during the first 3 quarters in Germany where we take heavy market shares, plus 37% for the first 9 months. We see the as well a slowdown together with the market, but we are gaining in absolute numbers and relatively a lot of market share. The reason for this is that our offering via independent advisers and the banks is more focused on restructuring existing loan portfolios of consumers. Why the slowdown is focused on new loans generated on the point of sale where consumers reduce their consume and it is their appetite for new credits. While in the restructuring business, you can say the tough time before and during a recession is still underway.

Yes, for this market, we see as well, quite some potential in the next quarters. Together with TeamBank, we are rolling out EUROPACE in the corporate packing sector called Ginoflex. We are still pilot size with good results. More and more cooperative banks joins this and offer for their restructuring EUROPACE solution to their clients. Next, credit market, Corporate Finance here in Germany, dominated still by our advice approach linked to subsidies and subsidized loans for the German Mittelstand.

In this business, we had a strong half -- first half of the year as well, thanks to an attractive program of still the old government which funded the energetic modernization of buildings here in Germany and we enable the German middle stand to use this to optimize their CO2 exposure. The new government still didn't bring any relevant programs to the market. And so we are facing right now a period where we see a lot of demand on the client side. German Mittelstand is under stress in the current market environment, but there are still no fitting program, support programs from the government side to meet this need plus the credit appetite of German banks in corporate loans declined. Risk profiles got the figure.

So the increasing need for financing is not met as well by the supply side of the banking industry there's growing a market for private placements and credit forms in Germany right now to meet this need. But for now, third quarter was not the time for a lot of transactions. And even when it's an advice business, we are as well transaction-based here. So we saw a significant slowdown in the corporate Fibers business. Parallel, we are working on the digitalization of this market. We launched funding port together with IKB one of the larger German corporate pilates banks here. And for now, the market environment slows down the rollout because the fit and credit criteria makes it more difficult to match business between the needs of the, let's say, the corporates and the offerings of banks.

But looking forward, the -- especially the increased appetite of Mittelstand for financing in the current environment increases the market volume, which you see after normalization of the market economy environment is. In total, for the credit platform, it means that we were still growing double-digit on a 9-month basis, but strongly supported by an intensive growth in the first half of the year. Third quarter was for this segment, first time for a long period below the comparable quarter in the last year and profitability went sharp down in the third quarter.

Looking forward, we don't expect any more to meet our targets here that we see a double-digit growth on top and bottom line. The current slowdown in the private mortgage business is too intensive to compensate this with market share growth as well when you look on profitability, even when I will introduce to our cost savings program, under German labor conditions is nothing you can adjust pass. So this -- we see the slow in profitability.

We saw it in the third quarter, and we would see it in the fourth quarter as -- so next business and a segment fully exposed to the mortgage business here in Germany, our private client business, the tencenetwork Doctor Cline, 200 franchisees employing more than 600 advisers, something which profited a lot in the first half of the year from the good market environment. But now under this current situation saw a sharp decline in client demand, which even which additional taking of market share can't be compensated in this speed.

So Doctor Cline still grew by 5% on 9-month figures but saw a sharp drop of more than 20% in volume in the third quarter. Yes. Again, when you compare this to Bundesbank, which right now reports a 0 flat volume, take into consideration that there is a time lag between what Bundesbank considers. So Dr. Cline took market share over the period of 9 months, and we are pretty sure when we see the numbers of Bundesbank in the next couple of months that we get the confirmation that we took market share as well in the third quarter, just in a fast declining market event. What is the important is because the market will come back that we keep as much advisers of our franchisees as possible.

This is a complicated process because our franchisees are independent to hire new people in this environment as let's say, it's difficult to convince them to do this because it just doesn't make sense because there is not enough advice there not enough demand therefore advice. So we can't keep our track of double-digit growth in headcount here right now. So we are right now at plus 2%, and we expect a further decline because it's just -- it just makes sense from the perspective of an owner to reduce its exposure and reduce the number of people he employed.

So the good news is that from the perspective of risk profile that this huge workforce is not on our payroll. And so we are a little bit more flexible here than other market participants, especially bank branches where the advisers are just to the payroll. And it gets really costly in such a market environment than you have not flex cost structure for your workforce. The segment in total, reported still a small growth in line with the volume growth of plus 5%. Profitability is already declining because of the hard hit in the volume decline in the first quarter -- in the third quarter.

And let's say, a scalable business model on the way up is unfortunately as well a scalable business model on the way down. So we are losing faster the profitability than we are reducing our revenue side here. So minus 41% on the third quarter on the EBIT side is a result of the scalable business model enter. Our interest to keep our franchise system and our central function for the entire system as intact as possible for the upcoming normalization of the market.

So our next platform, housing, real estate. Here, we are addressing roughly 60% of the market. On one side, we address together with the private mortgage business, we just talked about, the home ownership, the set occupied the market. On the other side, we addressed the institutional housing sector, the social landlords here in Germany. I told you a little bit earlier that the renting market is in a different but as well a heavy stress because of rent regulation. And let's say, is not offering solutions anymore for seekers. This is especially a situation for the private typically small landlords here in Germany.

The rent regulation, the increase in cost to maintain property. And if you have to refine at it or you want to buy new the sharp increase in interest rates makes it pretty tough to operate as a landlord. Lots of small landlords are sitting on high increase in book value of their properties. And we really hope that the current stress level brings them to sell the properties to homeowners who seek to own the home. And we expect in the next couple of quarters, that there's a shift in homeownership here in Germany because of the stress small renters are. We are just focused on the homeowner-occupied market or the institutional sector.

So a change with whatever happens in this housing market is something that helps us in the 2 markets that we address. So first market we address homeownership. The strong position of Europac roughly 30% market share here in the mortgage business. This fire, we addressed the transaction market, market share down when you expect that they gave us a number of roughly EUR 10 80 billion is correct. We expect this number to decline. But as well, we see that banks with their real estate agent offerings are under intense stress. And we are seeing a dissolution to them more about this in a moment.

On the other side, property valuation, something where we heavily invested in the last years and quarters, market share up first time above 10%. So we are gaining market share here a market which is still not affected by the decline but will come down as well slightly with the decline in mortgage volume and numbers of transactions here. Okay. First, more details about the transaction side of the market, we gain clients, especially in the corporate banking sector, thanks to a figure cooperation between Genopas and fire. And the fact that for banks to generate leads out of their own agent business is getting more and more important, and we digitalize this process.

In general, our clients lost volume sharply, minus 26% in the first 9 months and accelerating even when you compare the quarterly results. So this tells you a little bit about what's going on in the real estate agent market here right now. We could grow our revenue side in this market because we offer solutions. So especially to bring potential buyers or convert potential buyers or the buyer to a mortgage lead is something which gets more and more valuable, especially in the stressed market environment right now and where we are able to gain on both sides on the agent side, additional clients and/or on the mortgage advice side, additional banks using your business -- in the Value AG world of valuation, we have a good traction in signing up new clients out of the world of coping partner of our case. They start to use first services.

So valuation volume increases double-digit. -- product mix is a little bit not in our favor right now. So cheaper products are typically used first. And so our revenue increases slightly below the valuation increase, but we are growing and that's the important part. Is something very sad happened in the third quarter, at the beginning, actually, BaFin, German regulator decided to discontinue the based inspection option. So we were expecting 40% of properties, and we talk about more than -- more than 10,000 properties per month via a digital approach with the clients, this part ended this because it was linked to corona and by ending this special inspections, they created a lot of stress in the[indiscernible] because suddenly, we have to again bring some inspector physical to the property, you need to drive there.

And we had to hire a lot of people. We needed additional infrastructure. And the whole system was imbalanced in the third quarter to supply the banks with the necessary regulatory necessary inspection of properties. So we are in a process of getting this transformation done away from digital back to the offline way. And in a costly way, we solve this more or less in the third quarter. Still has a lot of optimization ongoing. We are working on this in the fourth quarter still. But this was an expensive change in regulation, which BaFin gave us here.

Now we switch to the institutional housing association side, the business which was an industry which used the low-interest rates still lower to state in the first half of the year a lot intensively. In the third quarter, they slowed down new project and finances significantly. So similar to the private client sector, similar reasons, Sharpies in interest rates, they are not met by sharp decline in property values or a typical usage of mortgages as well let's say, energetic modernization of properties, they slowed down this kind of project as well because of a mismatch between interest rate costs and the ability to increase rents. This industry rates for 2 things to change. The first, prices. And you can say in this professional environment, the probability of a sharp decline in prices is higher than in the consumer segment because you meet professionals here for them is a discounted cash flow on the portfolio on the property is a typical way to do a evaluation.

And is the sharp increase in interest rate, the DCS models gives a clear view that existing apartment complex were devalued. So we expect in the next couple of quarters, a positive change here that we will see again transactions. And this sector is committed to acquire even in the current times, renting apartments because they usually are municipal-owned or competitive owned, and they follow their interest of their shareholders in this case. Parley to this, the German housing sector needs to get CO2 neutral until 2024. The sector needs to invest EUR 500 billion to improve the energy efficiency of their existing housing stock.

And this is something where we expect as well an increase -- a sharp increase in mortgage volume in the next couple of quarters. Just what is needed is the right subsidy programs as well from a government side, something the current government is committed to just didn't execute it by now. So the pressure is rising as well on the political side here to deliver what they talked about. In general, the whole segment is growing double-digit. The end of the permission for the virtual inspections for cost us an extra of EUR 3 million in the third quarter. So the transformation was very expensive. This still cost us some money in the fourth quarter, but it's come back to normality here and the beginning of next year.

In general, you can say that this was a heavy investment case for us in third quarter and actually as well in the whole first 9 months. It's an area where we have to look pretty much in detail how we want to go forward how many projects parallel we are going to fund based on the change of the general probability of Harbor. So last segment, Insurance. You're aware of this. We have an offering already active Smart InterTech for private insurance, E-Pension that corporate or employer linked insurances. And during the year, decided to address the industrial insurance business, which we are in as well as a separate product line. In all 3 product lines, we are now pretty focused on these business models, which are in there.

We are restructuring case already during the whole year and made some good progress with all 3 of these product areas. First of all, private insurance business, plus 40% in the migrated volume to a transaction-based model, could be faster, still, slow down too much this focus for a long time for Smart InsurTech because there was some industrial business in it, and we struggled with the IT projects of our clients to bring them forward to ramp up this part of fully digitalized policies in our portfolio and in our IT system. But we are progressing and the new focus that we shaped this year it takes effect and will increase speed and profitability in this product area. And the good news market is not affected by the geopolitical environment right now.

So we are able to organically grow here. Industrial business, you can say at the beginning of the year, we were pretty surprised about our role in this business. You can say there is a relevant share already of the industrial insurance business here in Germany, which is powered by our traditional insurance management software. And together with our clients, we decided to develop the platform for the underwriting risks at qualify. This is under development right now, and we plan to launch this in the first half of 2023. So this is an opportunity for us, which we see here to monetize on the strategic position that we have in the market.

And last product area, ePension. -- employer-linked insurance product for pension. And since a couple of months now as well, health insurance. It's a fast-growing business where we digitalize existing portfolios, optimize the processes between the HR department of the employer, the employee and the insurance company and gate action here signed up some interesting clients and with 44% or on a clean crop tracker. For the whole segment, double-digit growth, including an inorganic acquisition of Amex Pool. Without this, it would just be 5%. This is below our expectations. That's why the restructuring during this year -- we finished the 9 months is a slightly decline in profitability.

But as part of the -- or is one of the reasons of the change in focus and the new structure we gave this unit. For this year, we expect to stay on track, no major changes from a market environment. And for next year, we expect that we see the turnaround here finally because of the new focus that we gave to units. Okay. In total, we are still on track to take market share in all 3 industries. We are still on track with the growth path when you look on the 9-month figures. Q3 was a first time depressed by the market moment. I can't stress this enough.

Let's say, we saw a sharp decline in profitability in Q3, but with the first 2 very strong quarters, we are still on a level like last year. Yes. So from our perspective, something significant changed. And when you look on a long-term perspective, we see that hardboard once again enters a new phase of corporate development, you can say. We started with 7 years of startup-like growth, fast top-end bottom line. Then we had the crisis environment around financial crisis, where we were keeping our profitability stable and we are just taking market share in the depressed market environment or more or less a stable market environment. Then we saw a long period of 8 years of strong growth and expanding our business top and Baseline again.

And now a new crisis environment started, and we need to focus again on growth quality, and expand our market share in a declining market environment. This will cost us possibility now and for the next couple of quarters. We will talk about this in a moment. But at the end of this period, we will be stronger and again, a different, much larger, much more important company for the whole market than we are right now -- so talking about the outlook a little bit, what's going on right now and how long it may take this very special market environment which we see right now in the private mortgage business? If we see some important factors which keeps owners and seekers might now to close deals from the perspective, especially of the potential buyer side is the highest levels, keeping them from doing transactions. Property prices don't fall fast enough in there in that perspective.

Inflation takes a toll on the affordability because other things get more expensive. -- income doesn't rise so fast right now like prices of day-to-day goods. We see, especially for the building side, as construction costs are heavily affected and the plus 10 plus 15 plus 20%, it gets really difficult to stay in budget or to create a new project. Energy cost, this is already normalizing again, but additional regulations linked to energy efficiency is a pain and the lack of compensating subsidy programs for the new regulation is an issue and needs to be addressed. And our current government has a green part in it. And by now, they are far behind what the last government offered in subsidies for homeowners and builders to get more energy assessment.

Okay, let's start the negative factors, the positive ones that will drive transaction volume back to normal and first trigger events happen all the time in Germany and Germany because of figure events. So the people want to move together, people get children, they need more space. People want to split and need separate homes or apartments. This is something which triggers to actions in Germany. And this is happening, just the transactions are missing means the stress in families are just accumulating right now. And it does this already for a longer period. In the last decade, roughly 1 million people less switched from rent to homeownership because they see at the 2 high prices now they fear or they hope again on declining prices sooner or later, the stress is so high that they need to do something. And this is -- it's like let's say, it's a market with pressure fast-rising right now.

So besides this, what is good is numbers of properties offered on the market are increasing, plus 50% roughly compared to last year right now. So there is more supply coming to the market. This is great. On the other side, for these families households under stress, the option to rent something is shrinking less and less renting supply. -- sharp increase in rents. So our new rents, you really can't increase exiting a lot, but new rents went up 1.6% in the third quarter. So on a yearly basis, we talk already about 7% rent increase. This is not far away from the inflation. And there, this is terrifying and the other options just to acquire something and have a stable annuity payment for the next 10 to 15 years.

Inflation may as well have an impact on the attractiveness of homeownership because it historically value of property increase together with the inflation rate. We see that things that are already under construction are more sold to investors. So the chance that homeowners, which usually refinance using platform using business models which are using EURO basis is higher. The regulation around energy efficiency may increase supply, especially from all the households which can't afford it or renew their home and increase energy level like government is forcing them to some brandies may see as well the energy bill and decide to switch to energy-efficient home ownership. So there's a lot of pressure coming from this as well to the market and which may increase the liquidity in this market.

And with this, the number of transactions -- and yes, last but not least, just what I said, our government sooner or later needs to live up to its expectation and bring some subsidy programs to the market which address climate change or housing crisis. And we are facing here a more and more tougher environment right now. So it needs to come. Okay. Besides this, hepat as a group is working on its cost structure because with the current stressed environment and knowing that this will not vanish in a couple of weeks or months. We are working on this that we decrease our cost level across the whole group. We expect to reduce our workforce by up to 10%. We expect to have some additional options for our employees to just work part-time.

So the 80% is a wide offering to a lot of employees to just reduce our cost base in alignment with the decline of the market. We expect this to be effective in the first quarter 2023 under German labor rules. It takes some time to adjust, but you will see the results in the Q1 figures. And it will be substantial to meet the declining working site. What we will continue our focus on keeping market share in a strong position. So we will continue innovative projects, which live up to the expectations short term, where we see results in Q1 or during 2003 already, we will postpone and delay in pause projects, which have further reached in all of our segments. -- how long can this period of, let's say, the first stressed market environment be?

Historically, we saw declines of maximum 4 to 6 quarters in Germany. We saw now already 2 quarters of decline. Because of the black swan and we never explain something that is we are uncertain how long it will take. So our predictions in total 4 to 6 -- sorry, 4 to 8 quarters. And if you're subtractive 2 quarters which are done already. So still 2 to 6 quarters, it may take until the market normalizes again. So this -- for this period, we are preparing ourselves now with our cost-cutting program as well. And looking then forward for the new ways and then after normalization of this market.

And then new figures and vest about this, after this period of sediment, expect the German mortgage market to be a very attractive position and expect us to have taken market share during this period and be a more relevant. So just to give you some numbers, when you look on the historic environment that we never saw a real boom in Germany in the mortgage market, we talk about an average volume of EUR 280 billion in mortgage volume, which will come back. And this is an additionally powered by strong net migration to Germany. So a lot of more people who will look for a solution will drive prices up, will drive construction up again and pretty sure will drive up the efficiency of usage space as well.

In Germany, we had for a long period now a tendency that the square meter per person went up constantly. The German government wants to get to a level of 400,000 units built per year. Our expectation is that we see right now a sharp drop in, let's say, the Q3 numbers only affect the 150,000 units built. This is far away from this what is needed. So if we don't find -- if government doesn't find a way to normalize this, why subsidies, the stress on the pricing side will be higher. We expect that, that will come with solutions. And is this an additional of EUR 30 billion per year is needed to get from let's say, our last level of 300,000 units to the 400,000 units that are actually needed.

Next is the whole energetic transformation of the housing sector until 2020 is 2045 to bring the German housing stock to neutral energy efficiency level there are EUR 3.5 trillion needed to be invested. -- for the housing -- for the homeownership market, which is roughly 50% of this, it means to invest EUR 80 billion per year. Still, the incentives are missing, but the stress data. And if you want to meet this, this addition at EUR 80 billion need to come find somehow. So they will increase the volume of the mortgage market. And last but not least, there are a million households who missed in the last decade to move from rent to home ownership. They are -- they are waiting for the opportunity. And the renting market is locked is not going to give them a relief. So some of them will have to migrate to the homeownership market via a mortgage and buying a home.

So in total, we expect after the normalization of the market, the German mortgage market will come back to a volume of EUR 300 million to EUR 400 million again. The sort is already in the last quarters that this is possible, and we expect this again and there's a lot of macro dynamic here, long-term trends that were power this. So when you look on hyperpord, there is an opportunity right now. We are in this opportunity. So talking about opportunity, expect us to grow double digit above market. And as long as the market is normal and stable, it means the double-digit growth to last plan. If something like right now, occurs the period delivers an underperformance on the profitability level, but it is only short term as long as this occurs.

So for now, we don't update our guidance for this year anymore. We will see how we finish this. We will have some restructuring costs in the fourth quarter next time when we talk to each other in the beginning of March. We will give you a guidance for 2023, knowing how the market started then. For now, we are working on our cost-efficiency program and try to use as much opportunities in the market as possible and gave to [indiscernible] market shares for the upcoming normalization. Okay. So at this moment, I would like to hand over to the moderator, if there are some questions from your side, feel free to ask.

[Operator]

[Operator Instructions] There are currently no questions coming in from the audience for closing remarks other factors later.

[Ronald Slabke, executive]

Okay. Yes. So let's hope that I answered all questions already during my presentation. If you have further questions, please contact our IR. We are working here with a huge focus on using this current market environment in the best interest of our shareholders. Let's stay in touch beginning of March, this will come with an update about how we are going forward, what we achieved already, and where we see the potential for the near-term future. Up until then, stay safe. Bye-bye.

[Operator]

Ladies and gentlemen, thank you for your attendance. This call concluded. You may disconnect.