Hypoport SE

XETRA:HYQ

Earnings Call Analysis

Hypoport Forecasts Significant Revenue Dip, EBIT Drop

Hypoport's financial year has been tough, expecting a revenue decline by up to 25%. The lower revenue forecast is due to various factors, including decreased transaction volumes in personal loan business and reduced revenue from REM Capital, affecting overall growth. Additionally, a shift in consumer financing towards shorter fixed interest rate periods resulted in a revenue decrease. Moreover, while Hypoport's AVM (Automated Valuation Model) is live and integrated into Europace platform, it's not yet adopted by banks for regulatory purposes. Despite the financial strain, the company anticipates a positive trend for the upcoming year.

Q3 Earnings: Slight Recovery Yet Below Expectations

The Q3 earnings call reveals a marginal revenue and profitability increase compared to a disappointing Q2, but still falls short of expectations. The tempered results reflect challenges in the residential mortgage market which is intertwined with the company's business model. The market dynamics demonstrate the fallout from regulatory changes and a decline in the personal loan business, attributed to a weaker macroeconomic outlook. Despite this, the company has reported market share gains, suggesting resilience amidst market turbulence.

Analyzing Segment Performance: A Mixed Bag with Growth and Challenges

In a detailed segment analysis, success stories intermingle with troubling developments. The Private Client business, particularly the Dr. Klein franchise, reports a 7% growth quarter-over-quarter, even achieving record-high market share in September, outperforming centralized competitors, as well as a modest boost in profitability. Conversely, the Real Estate sector exhibits a harder hit by the changing financial climate, with valuation struggles, delayed revenue streams, and a significant reduction in transaction volumes for housing association financing. Meanwhile, the Insurance segment experiences its second profitable quarter successively, buoyed by momentum in occupational pension markets and a growing demand for digitalization.

Prospects of Market Normalization and Long-term Predictions

The company acknowledges the duration of the ongoing crisis was underestimated and maintains the view that normalization may take up to 8 quarters. While progress has been made, market challenges continue. However, management expresses confidence in Hypoport's strategic stance and market positioning, alongside strict cost management and an anticipated market recovery. The expectation for 2023 suggests a revenue decrease of up to 25% and an EBIT between EUR 10 million to EUR 15 million, incorporating nonrecurring one-offs. Looking beyond the current year, the company projects a return to double-digit growth, optimistic that market conditions will eventually improve.

Feedback and Expectations for Business Improvement Moving Forward

Management invites investor feedback on the English conference call format and highlights a focus on ending the year on a strong note while preparing for the future. The company remains committed to tackling growth head-on, with strategies in place to counteract the headwinds and continue driving towards new records and sustainable growth beyond the current fiscal challenges.

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, welcome to the Webcast Results Q3 2023 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 today's conference. Please go ahead.

[Ronald Slabke, executive]

Yes. Welcome from my side as well to the Q3 numbers. And just after the unusual thing, it's 2:00 here in Germany. And normally, this is a German webcast. Today, we decided to do it in English. I have to leave to an investor conference today in the late afternoon, and it was impossible to schedule 2 different meetings for 2 different languages today. So we decided to do it once in English. So we are happy to hear your feedback, especially how many of you would prefer to still have the German version part of it. So with your feedback we will decide how to go forward in the near future then.

Okay. So let's get to the results of the third quarter. You are aware of this. We published already our numbers. Q3 was, let's say, above the second quarter, which was slightly disappointing, but still below our expectations. And when you see the distribution of our revenues in the 3 different industries that we serve, you get the feeling that again, it has something to do with the residential mortgage market here in Germany and what's going on there. And the business model is more or less linked to this very special environment we are in right now.

But just to give you a quick overview, if you still undecided if you are also listen to the whole podcast, Q3 was a quarter with a slight increase in revenue, let's say -- let's call it a slight increase in profitability, still a small loss after the second quarter, which was the first loss-making quarter in this year. And as a good start with our first quarter, which was above expectations. And in this, we saw some good news. We saw slightly positive trend in this residential mortgage market. Let's say, not a dynamic that we have expected after the summer. We see the second quarter in a row in our insurance business profitable, which is a great development. And as we started to restructure our valuation business because this was hit hard in the second quarter, and there's a lot to do right now.

Still some let's say, bad news -- negative impact we saw in the third quarter. So still there's a lot of noise from the government what they expect to do, wanted to do, may do which, let's call it, threat to consumers in the process of making decisions. And as well, we saw a decline in dynamics in the personal loan business, thanks to the declining general macroeconomic outlook here in Germany. So banks -- especially on the banking side gets a little bit more risk on the personal loan business. And with this impact, we see -- let's say, some changes in the market environment here as well.

So all in all, Hypoport is mastering this crisis. And I can tell you already right now that we are gaining market share in this turbulent environment right now. So talking about turbulent environment right now. We start with our core market residential housing market here in Germany. What's going on? What changed Q3 compared to the previous quarters?

So let's start with which dynamics stay intact. So we see a stable amount of trigger events in this market. So live events, which people in Germany triggers to think about acquiring their first home and moving their family there. We have stable growth rates. We have steady developed rates, and we have a stable interest of the whole society in home ownership. On the other side, one typical way to as a sort of [indiscernible] to not buy to rent where what we opted to rent. And this is on the -- this market is under even more stress than the homeownership market. The new construction, more or less vanished. We just finished residential units right now which were long planned and long awaited. We see a stable massive net migration to Germany even with the current turbulences and hopefully, a change in the quality of migration that we see because the German labor market has a huge demand looking on the next 10 years.

And the high migration numbers we see doesn't fit always to the need of our labor market. And this topic is now more valid than ever and is addressed on all political agendas. So what we see is that especially private landlords try to exit the renting market. So as soon as renting contract is finished, someone moves out, a lot of smaller landlords put their apartment for sale to -- instead of occupying families. Then this is a great development from our perspective. The reason for them to do so is that the massively regulated rent environment is not affected any more than you see the current returns. You can risk-free achieve on government bond and so on. And especially pressure on the regulatory side, a lot of landlords, let's say, try to realize massive profit they made in this housing market and try to exit now. So this saw the lack of supply and the landlords who try to move out and a huge demand leads to sharp rise in rents, especially in the metropolitan areas.

In Berlin, we see rent rises of close to 20% on a yearly basis. This is massive and this describes how impossible it got to find relief for your change in housing space in the renting market. So they need -- it's not the only a wish to own your home. It's more as well a need to own your home because of the lack of supply on this historically efficient renting market in Germany. The affordabilities during the past quarters, I would say, all in all, stayed stable. We see that the interest rates are now the fourth quarter in a row more or less stable, plus 0.1%, you can say, but it has a volatility of around 0.2% or 0.3% per month. So if you time it well, you have steady interest rates over the last 30 months now.

Real estate prices were trickling down since the beginning of the year after a sharp decline end of last year. So with stable interest rates and more or less stable real estate prices, in general, you can say the affordability stays the same. Incomes are improving in Germany. So all in all, the affordability for ownership is stable.

So here in this, you would say, okay, so a number of transactions should go sharp up, then the live events, the triggers are there and more and more people are waiting to do something. Renting market is closed, affordability stable, so people should act. What keeps them -- or what lets them hesitate are a lot of initiatives from the political side to release their burden just with this, let's call it, the topics put on their agenda, it creates a certain uncertainty, how long you have to wait to actually benefit from this -- about this on the political agenda. So how long does it take to implement it, and when it's coming and should I wait or should I act right now.

So we have discussions about the property acquisition tax here in Germany. We have constantly, we have discussion about subsidies, adjustments or proposed adjustments to credit programs for first buyers. Let's say, all this is on a constant basis, a very hot topic in the news. And let's say -- let people hope that in the near-term future for their need is a better solution than right now. And this is for now keeping the market to -- with a high dynamic normalize again.

So just some underlying numbers to make sure that you are aware of the scale of the situation. The population in Germany is growing heavily, thanks to migration. So in the last 3 years, more than 1.3 million people added to the population in an already stressed housing market. We see that currently 47% of the population wants to own their own property. So the share of people who are fine with living in the renting spaces keeps declining. Rents are up since 2020 by 21%, as an average in Germany, as I said already, especially in the metropolitan areas, the dynamic is much higher even when there is a heavy regulation on this. As supply is down. We are -- we see a decline of 9% in the last 3 years. And when you look in the metropolitan areas, it's even more intense, the number of apartments available to rent, especially for young families, is extremely limited more or less, not there. Interest rate, when we talk about interest environment is unfriendly.

We talked about the 4% 10-year fixed interest rate loans here in Germany, actually 12 years and 15 years for a similar price. I know that especially our [indiscernible] business you would be happy if you have interest rates of 4% [indiscernible] or already this 4% feels now pretty expensive taking into consideration that 2 years ago, it was [indiscernible]. And this still needs the adjustment of the trigger release to make the decision to acquire home even when [indiscernible] it would have been 2 years ago. And question on I told you already, and looking forward, we don't see any acceleration there. It's actually more and more indicators shows that even the trickling down has slowed down to just perfectly stable market and, let's say, a question of weeks or months turning in prices started to [indiscernible].

I think this may be as well as in a lot of people now, which may have triggered in the last 8 months are [indiscernible]. So they [indiscernible] find perfect moment to buy. I [indiscernible] negotiations with potential sellers and try to find the optimum [indiscernible] optimization, let's say, hopefully, nobody misses the perfect movement here.

Okay. [indiscernible] I talked about, you see [indiscernible] you see comparative prices actually, is [indiscernible] market was in -- is that [indiscernible] share figures and to you can number of people [indiscernible] coming out impact downside on customer [indiscernible] we saw some recovery in the last 6 quarter here, but this is a [indiscernible] have as it out in [indiscernible]. So this all led to a slightly increase in mortgage volume in this market. We saw a plus 1% Q2 to Q3 in the figures of German Bundesbank. It's a pretty weak September, to be honest. So we found the bottom line. We found the baseline. And in this market, the different business models of Hypoport are a core talking point and the core solution to, let's say, to handle this extremely challenging situation for everyone in this market.

So how we performed? Let me start, as always, with our credit platform. In the center, Europace, especially for the mortgage business, saw a plus 7% quarter 2 to quarter 3 in transaction volume compared to plus 1% Bundesbank. And as I mentioned already, let's say, on a stable volume. So while especially in dynamic environment, we see obviously a time lag between what we report and what Bundesbank is reporting. So Bundesbank Bank is typically a couple of months behind us. In the stable environment, you see the market share gain, which we achieved. And this is -- the plus 7% is overall. We can now look a little bit more in detail on the side of the usage of the mortgages.

Here, we see that -- and Bundesbank Bank doesn't disclose their mixture of usage of the mortgages. So we can't compare. We can just compare with ourselves. And we see that we are on a historic low level of new mortgages for new constructions of homes or condos. And this is something which is, I would say, a huge potential for the midterm future. Currently, this is what happens on the Europace system as we are able to predict that less than 4,000 homes were financed in September. And when you compare this to the expectation of the German government that they want to see more than 33,000 units build per month, then you see the excessive gap we now take on the construction side.

Still, there's a lot of construction ongoing. But we see this what the finance, what's going to come in the next 24 months. And this is on a historic low level. So this is what we see right now as well, you can say, on the -- with this market environment we are operating in is not sustainable for a society when you look on the new construction side.

Similar is the refinancing market. Right now, 7% of the total mortgage volume right here on Europace, historically, it's between 15% and 20%. As you're aware of, Germans usually finance for 10 years plus, and they have to renew after this 10-year plus. With the very special situation of the interest rate development in the last 2 years, we face a period where the longer durations wait to the end, while they previously refinanced after 10 years. At the end, it's often 15 years. So we are now in the middle of such a transition period where people with longer [indiscernible] years wait as long as possible while they previously acted as early as possible.

After this transition period, and this will be latest in 2027, the mortgage volume on the platform automatically rise again, and the refinancing volume will adjust to the historical normal level. And then in case of interest environment, it may come earlier or it may be even more intense depending where interest rates are.

Okay. As well on the mortgage side, building finances. So there is not really good [indiscernible] in Germany. A product which profited last year from this uncertainty in interest rates and is now the market is down 7% quarter-on-quarter. And as well, we see not a very booming market there for this product to secure even longer interest rates than you do with your fixed interest rate mortgage. And something to mention, and it's part of this only plus 7%, you can say. We are successful with our largest client, Deutsche Bank, to migrate their branch business under the Deutsche Bank end of the second quarter.

And we expected actually some positive impact from this already in the third quarter. But unfortunately, and this is just rumors in the media event even up to the German parliament for discussion. They struggled with some internal IT problems and especially the payment processes as well on accounts, but as well on mortgages are disrupted right now. And with these challenges in their processes, they don't contribute to our growth as we would have expected this.

So after Deutsche Bank and the Commercial Banking side, here some good numbers from cooperative banks and savings banks for the last quarter. Plus 19% on the corporate banking side and 13% on the savings bank side on a quarterly basis. So they strongly gained momentum, you can say, in this market. Together, close to EUR 5 billion already, a 1/3 of the total transaction volume of Europace now. And an ongoing success story for them and for us. So together, we are digitalizing their sales efforts in mortgages, and they get more efficient this way, more competitive this way and gain market share while others may struggle right now. And the Hypoport is -- it's a huge potential.

Jointly, the sector represents roughly 60% of the total German mortgage market. And this itself only on the platform, you see the potential already from this perspective. And with our ongoing success in both of the sectors of migration, we will keep going forward and take market share gain. So all in all, you can say mortgage market, it is as it is, but Hypoport is taking the opportunities which are in this market and is gaining market share. Even then, we were increasing our contractual fee starting on 1st of July this year. For the broker business, we had to adjust. We had underlying assumptions about the risk of this market, the volatility of the market, and the transaction-based pricing model is linked to the volatility, as you can imagine. And we had to adjust this. And thanks to the huge support and the fast development in the last years of new features, which we put it to the platform, the price increase was well received by our clients.

Okay. Next market within the Credit Platform segment. Personal loan business, Q2 to Q3, flat from the production volume side. As I mentioned already, the market for personal loan got more challenging in the third quarter because on the changed macroeconomic outlook, we talk about the recession in Germany right now, even when it's just a light one, but the uncertainty is increasing and banks taking their credit rules. And with this strictening of the credit rules, the chances to transact personal loans are declining. And especially with our focus on restructuring loans of consumers, this gets a little bit more a difficult market environment.

Good news on the other side. We keep rolling out in lots of banks, especially in the cooperative banking sector. So we are gaining sales activities on the platform. So part of the challenging market environment, we are able to compensate just by taking market share.

So next segment, Corporate Finance. With a strong focus on providing access to government programs and subsidies, and then structuring the whole financing of the project. Here, we saw a decline in new volume for projects in third quarter, which is typically seasonal because it's a holiday season, so not so many new projects are started. So nothing to worry about, I would say, for now. But in general, it's a developed market which is affected from macroeconomic outlook. Even the subsidies, German Mittelstand, we're considering the investment and innovation projects when the outlook is changing.

Good news, I would say, from us, from a strategic perspective, there is a huge transformation necessary for the German Mittelstand, as you can say, more or less every business has to transform and fit in the new, let's say, legal structure of climate goals and autonomy regarding value chains, which are on political agenda and with an increasing level of subsidies available to do so. It's just a question of time that there is an increase in market volume here, even then in the third quarter, we didn't see this.

So total performance of the whole segment, including all product areas, you can say stable revenue side and slightly increased profitability. While we saw a positive impact from the mortgage side, we saw in the quarterly comparison and negative impact from personal loan and corporate finance business. The ongoing focus on efficiency -- cost efficiency, let us gain profitability in the quarterly comparison here.

The outlook. We have revised our group outlook because, especially in the private mortgage market. We didn't see the expected dynamics in an improvement of the market conditions and changed our outlook to, let's say, for this year, a stable market environment, and revised our expectation for this.

And from today's perspective, let's say, we see that this crisis environment is still there. It's still ongoing. The longer it takes, the bigger the chances are that the concentration, especially on the sales side, is improving. And with this the competitiveness, especially of the larger Europace partners is improving and the stress for the banking sector is there. And so the need and motivation to make way to Europace is higher. So the longer it takes, the better will be the outcome in a couple of years for us.

Okay. Private Client business, as well mortgage linked heavily our Dr. Klein franchise network, where we generate leads online, managed the product supply side and thanks to Europace offer digital processes for the advice process for our franchisees. What happened here? First of all, Dr. Klein was able to grow quarter-over-quarter by 7%. So outperforming the market as well heavily. When you look on the monthly numbers, you can say, market share of Dr. Klein in September was on a new record high. And this is -- in this challenging environment. And this is thanks to, let's say, the resilience of the franchise network, where local business owners do better decisions than centralized organizations, you can say. Yes, they as well decline in numbers of advisers still because they as well expected, like we do that this crisis will -- or the recovery of this market will be faster and more dynamic.

And when they see that the market is more or less just plus 1% stable, they can take market share, but they can't keep all their advisers, which they had still from the booming phase. So in -- there's a certain level of delay that they adjust as well here. But we see that let's say, together with them, we are able to outperform the rest of the market, the agents or the advisers which are employed by banks in different branches and wait for clients to come or the more loose networks where small advisers just processed mortgage needs to larger organizations. So it is such a tipping only, this is something which is vanishing in the market right now. So Dr. Klein is structural taking market share here. And he goes the same as long as this market environment is as it is, Dr. Klein will relatively be stronger in this market.

Stronger top line growth for this segment. So Dr. Klein was able to achieve in line with the transaction volume growth as well as revenue and gross profit growth. And thanks to a very strict cost management, they were able to increase slightly their profitability and be one of the very successful business models in this current market environment right now.

Okay, after this positive perspective from the private client side, we are coming to real estate, something where we expanded heavily in the last 5 years and where this environment hit us the hardest you can say. You are aware of this, we are serving 2 target groups here, homeowners and institutional housing companies, especially the municipal and corporate account, with a lot of different business models, which we developed or acquired extensively in the last years. So this business model perform in this market environment quite different, you can say. So it's -- you can't look on the segment just from a summarized view, you need to go a little bit deeper.

First, property sales platform, strong position in the branch networks of savings banks and Deutsche Bank and increasing a number of clients on the cooperative side, could increase its transacted volume. So that's a positive side. The ERP system for housing associations, which is part of this product area here, could gain a huge momentum and gain a lot of contractual partners which need to be migrated on the platform right now. They are getting bigger. They are getting larger housing associations. And with this, the projects get longer, so the revenue stream comes a couple of months later. So in total, the positive development on the real estate agent side and as well as positive, but timely delay -- development on the housing association side brought us to a state of [indiscernible] in this product area.

In the world of valuations, we were a pretty aggressive market player up until the crisis started. And had done first in last spring, a regulatory event where the regulator canceled the approval of media inspections. And we had to heavily change our resources and processes and struggling with this, when regulator at the end of last year changed the product mix in the market heavily. And this is all in a market where you can say, only 50% of valuations are needed anymore when you see the total market environment reported by Bundesbank.

So a lot of turbulences from the market plus regulatory events. And you can say it hit us in the wrong moment. We were on a growth track, and we are heavily investing in people and infrastructure and had already last autumn to restructure the business and thanks to the changes in winter, do this again right now. And it's tough and it's costly. Just we see that the rest of the market is struggling as well with this environment and the strong link that we have to our mortgage operation gives us an unfair advantage which we couldn't monetize by now. But looking forward from a strategic perspective, we see that we are able to -- we need to be able to make this business more profitable than everyone else at scale. Just the turbulences needs to be handled well. And indeed, we are working on this to improve it and bring the right people to the right product here right now.

So painful development, I can tell you, but we are working intensively on this topic.

Last struggling environment, financing for housing associations, a very -- a business model where we are in for a long time -- that's growing for a long time. And together with the industry, which needed more and more capital. Our usual transaction volume per quarter was around EUR 0.5 billion. And this started to decline last autumn. And since the second quarter, we are on an all-time low level here right now because the industry is in more or less a freeze mode. Last year, they stopped new developments because of regulatory environment, plus interest rates. And this year, you can say they even froze most of their -- not most of their -- energy efficiency projects. So optimization of the current household stock.

So both types of projects are now on hold because of the uncertainties in the regulatory environment. What is certain is that until 2045, the whole 3 million units of this industry needs to be a carbon neutral and that more -- much more energy efficient than it is right now, and it needs EUR 500 billion in investments. And it's a simple division. This is something around EUR 23 billion, EUR 24 billion per year that needs to be invested. We are the market maker in this and see roughly 1/5 of the volume. And currently, this topic is not addressed. And the challenge is getting bigger each quarter, and then nothing is happening here.

Okay. On a quarterly basis, slight plus, but we are on a so low level that it's depressive to even talk about it. The outlook is the more important part here. So in general, you can say it was a stable quarter for the whole segment. So the summary of all these activities. But as I mentioned already and as you are aware of, I mean, you're for a long time, follow us, Q2 was a very weak quarter for the segment, and we are still in this trouble. And center of this is unfortunately valuations. There's a lot of challenges. While the housing associations with the ERP system and the financing are something that will pass by certainty in the near-term future.

Okay. Last segment, Insurance business. As you are aware, we are addressing 3 different product areas the private insurances, industrial insurances and occupational pension schemes. This 3 we address as marketplace and additional services here in this segment. On the personal insurance side, we still are seeing a positive trend on the migration to the platform from our clients on -- with on-premise solutions that we acquired, plus 3% on a quarterly basis is a solid result when you look on the weak dynamic, especially in the last year. What we see is that the need for digitalization is just obvious, and the increasing press from the revenue side, lead more and more organization to look for this efficiency gain, which we are offering. And this results in high investments from our side in new ideas and new projects to accelerate this process. So a positive development. We are progressing even when it takes long, and we still have EUR 4.5 billion of premiums to migrate. We are getting forward here.

Industrial insurance. We provide the ERP system for 6% of the market and started to develop a marketplace for this insurance risk. Corify is right now signing up the first major clients. So we got the first signatures after 2 years of development with this industry and our ERP partners. And we see a positive dynamic here. We expect more of our clients plus as well industrial insurance brokers, which are not using our ERP system to join the marketplace and to initiate here something new for the German insurance market and especially an area which is under digitalized. So with huge potential and massive efficiency gains when it comes to finding the right underwriter for individualized priced industrial risk.

One last area, occupational pension market, the digitalization between the employee, the employer, the HR department, their insurance broker and the insurance company, massive dynamic on a quarterly basis. We are now at 1% market share. You see the potential, 99% are underserved. We have one core competitor here and we are winning [indiscernible]. In the third quarter, we could sign up another large new client, which is right now in migration, which will help to accelerate this migration to the platform of this pretty attractive market environment for us, high complexity, lots of parties in the market. And with a great technical solution to integrate this all. So really nice momentum, and part of the success story and the positive development of the whole segment.

Yes. And whole segment, with some seasonal assets, to be fair. So it's not -- don't expect for every quarter this growth rate. The second profitable quarter in a row and a pretty good pace to achieve the goal for this year to be profitable.

And with the underlying dynamics in all 3 product segments as well something that the positive outlook, even then we will keep trying to move fast here, then this industry is pretty attractive right now as well when you just look on the stability that it provides to us and to the economy, as well when you see how much capital is going in this market right now. So a digital infrastructure for this market is something that will be very valuable long-term.

Okay. This where the deep dive in all 3 -- all 4 segments. And as a summary, yes, let's say, more or less stable results compared to the last quarter on an extremely low level, especially when you look on profitability. We are just valuing what we are investing in new ideas and [indiscernible] active projects ongoing with close monitoring of the pressure in the market. And on other side, positive business, which has to provide [indiscernible].

Yes. On a long range, you are aware of this, we will not see the, let's say, new record year this year. We will be low 2021, 2022 after this sharp change in the housing market and the declining volumes there. But we are well on track on quality growth, gaining market shares in most of the markets where we are in right now here. And with all our ambitions in the different projects there -- we prepare for the period after the normalization of the housing market here.

We keep our costs under close monitoring, stable since the first quarter. So we compensate structural increases by inflation with additional efficiency gains, and headcount of the Hypoport as a group is still slightly declining on a monthly basis. So we are focusing to get as fit as an organization to optimize all our business models and use the current market environment, external and internal to strengthen us.

So outlook, and this is the logic. It's a core focus on what's going to happen in this market. We started roughly a year ago, you can say, a little bit more than a year ago with announcing that there is a crisis ongoing, a special environment, and we expect that it may last between 4 and 8 months. So the 4 months are now passed -- sorry, first 4 and 8 quarters. The fourth quarter is passed now, and we are still far from normalization. And so looking forward, we still don't revise the 8 quarter prediction. So we still think that it's possible that when we talk in a year, we are on a completely different market volume level again from where we are right now. So why we think this? We simply see that there is more and more pressure transaction not done of trigger families, more and more pressure on the side of people who want to sell their apartment. It's because nobody is living there anymore.

And this mismatch in the market is low liquidity in the market needs to -- this pressure on both sides because both wait for the right moment. And additional families are triggered every month, additional properties come to the market every month. So this pressure is just arriving, and in some moment, triggered by whatever, maybe necessary for this in the near future is going to fast change that, not like it is right now where we are more or less just stable in the bottom of this situation.

So we see a normalization there. Plus we see our market share gains in the different business models to tell you and exceeding of even the trends which we expect from the market side. And from the market side, still all necessary investments which needs to be done in the whole housing stock here in Germany to achieve carbon neutrality, to achieve independency of gas and petrol from Russia if the necessary investments are not in the current volume. And just to achieve part of this goal, we need to get to additional EUR 20 billion per quarter in investments beside the normalization of this market. Yes. And as mentioned earlier, the call volume of financing of new homes, so providing new leasing space is unsustainable. So something needs to happen there. And so costs need to get down and efficiency gains in the building industry is on and say, but as well, the regulatory environment is still not a fit. So the regulatory increase the requirements at the cost of construction in this period since 2014, which you see here. And that's necessary to come to a decline to fit to the current especially interest environment.

Okay. So with this in mind, looking forward, we revised our this year expectations. So we will be down in our revenue side by up to 25%. And we will deliver an EBIT of something between EUR 10 million and EUR 15 million only because of -- is nonrecurring one-offs which we have to realize in the last quarter. So it's a struggling. It's a painful year from a financial perspective for Hypoport. From a strategic perspective from the look on our different market positions, it was well used by now, and we expect a positive trend in the next years when it comes to monetizing on this position that we achieved here.

Yes, and that's fine. We are solid with our -- and we stated our long-term goals, double-digit growth after this crisis is in our base numbers and starting in 2024, it is. So from the current level, there's just 1 direction, then it's going to go up in the next year.

So thanks for your attention by now. And now I hand back to the operator to moderate our today session.

[Operator]

[Operator Instructions] And our first question comes from the line of Gerhard Orgonas from Berenberg.

[Gerhard Orgonas, analyst]

A couple of questions, please. First, on the real estate platform. Did I understand correctly that you are undertaking more cost cutting at the moment? Or is this -- is this kind of minus EUR 4 million, EUR 5 million run rate that we should expect going forward until the market picks up? Secondly, also, Scout24 made an acquisition recently called Sprengnetter. Could you maybe contrast your offer of Value AG compared to Sprengnetter? And then my third question would be about the one-off that we expect in Q4, but round about EUR 15 million from a reversal of earn-outs, is that correct? And the fourth question is on your balance sheet. It seems like that your lease assets have reduced significantly in the third quarter. Is that part of your -- you sub-renting property?

[Ronald Slabke, executive]

So okay. Yes, that's -- okay. Cost cutting. Yes, let's say, the cost-cutting is part of the massive change in -- let's say, in how we do the business, which resources are used for what. So it started already in the third quarter, and it's an ongoing process for our valuation business for the next quarter. These are massive changes in the environment and to adjust as an organization is a challenging path unfortunately. But part of this is reducing the cost, yes. And it just started. Yes, Scout acquired Sprengnetter. Interesting move, I would say, it's -- Sprengnetter is a business model around valuation in Germany. And a company which is -- has a pretty strong link in the real estate industry, you can say. They are as well present in such a larger banks.

So we know each other. We see the -- let's say, we see the strong services and products they offer, and we are cooperating in certain areas even, which as I thought, we don't treat each other really as a competitor more or as someone who has interesting different perspectives and additional services. So let's say, difficult to compare Value AG and Sprengnetter that exhibits each other because the overlap in the product areas are small. Value AG core focus is credit industry, and let's say, the mass market. And Sprengnetter, its core focus, I would say, real estate industry.

Yes, one-off, let's say, there will be multiple one-offs. A major one you described already, and your rough guess, maybe right. We still don't know, to be honest, because it depends on the performance of this year of the acquired company. So -- but we are talking about a substantial nonrecurring event. And some more, including ongoing restructurings, where we are still not separate the cost of them from our ongoing business. We will give them more transparency at the end of the year.

And the last was development on the let's say, sub-renting side, let's call it. So this is what you'll see in our numbers regarding, let's say, the asset side and the appreciation. Let's say, what we just used in our renting space. On the other hand, we like to optimize this. So as well we got rid of some renting contracts with some one-off payments. And plus, what is more difficult to realize is we as well subrent and achieve there some income streams, which are not part of the -- let's say, which are not how to say, equalized with the -- [ according ] costs. So we reduced our renting space right now. And this is not just because of the declining numbers of people. We still see that a lot of Hypoport teams and business models worked pretty well remotely, so the number of employees in our offices is extremely low still. And so we optimize the efficiency in this area as well.

[Operator]

And our next question comes from the line of Marius Fuhrberg from Warburg Research.

[Marius Fuhrberg, analyst]

First one on the credit platform. And we observed a rather flat revenue quarter-over-quarter while the transaction volume went up. And I understand that this might be a reason for maybe unfavorable product mix and also REM Capital being down quarter-over-quarter. But considering that the take rate on volumes from independent brokers, which you increased in Q3, I would have expected a little bit stronger EBIT margin and especially also strong improvement there. Could you maybe explain on this and give us a little bit more color there? And the second question is with regards to your AVM, which is now live as you stated. How is the regulatory framework there? Are banks already allowed to use it? Or is that yet to come?

[Ronald Slabke, executive]

Okay. Yes. Let's start first at the product mix, yes, absolutely. We saw a decline in volume in -- now let's say, we saw a stable transaction volume in personal loan business. To be fair, a declining -- a slightly declining revenue there because of the duration. We saw a decline in revenue on the REM Capital side, and this affected the total revenue development. Plus the -- what we saw in Q3 compared to Q2, especially, is that consumers reduced their fixed interest rate period faster than the previous quarter. So this is a stable interest environment to be fair. So we dropped more than half a year in average fixed interest rate periods, which cost us as well a couple of percent in revenue share. And this is average over all transactions. So the bank branch transactions and the broker transactions. This was that, you can say, a negative impact for the total revenue growth.

So not ask me why consumers started to finance shorter on such a short period of just 3 months, but they did during the summer. Yes. Okay. That's -- and AVM model, yes, actually, we are live with our third generation of an AVM model. It's integrated in Europace, and it gives transparency to the mortgage advisers about the -- our perspective on the value of the property, and we provide this as well to banks if they want. For now, banks are already from a regulatory perspective, forced to stay with their AVM models. Ours is, let's say, competing and giving a different perspective, as well predicting the outcome of other AVM models and the probability of -- let's say, trouble coming from the valuation side for the mortgage process. But it's still not used by any bank as their regulatory AVM model. And from this, we are absolutely far away because this is a long process with the regulator for a bank to switch from one AVM model to another one.

And as well for us, it's for now more important that it's visibly -- that is visible along the whole value chain and that it gets better and more accurate and that it learns because it's AI and gets it just better and the rest will come by itself.

[Operator]

[Operator Instructions] Our next question comes from the line of [indiscernible] from Banco.

[Unknown Analyst]

I have four questions, please. Firstly, your revenue outlook for '23 seems to imply a quarter-on-quarter volume decline at Europace. Or have you otherwise implemented some cushion into your outlook? Second question, which additional annual cost savings do you expect from the current restructuring of the real estate platform? Thirdly, is it correct to assume that you do not expect any goodwill impairment charge for this business here, given your EBIT outlook? And last question, will the release of the earn-out component be tax-free, probably, yes, but I'm not sure.

[Ronald Slabke, executive]

This was fast. So first question, yes. I'm not aware that we disclosed revenue development -- our revenue development expectations for the fourth quarter and that we expected a decline. So I'm not sure how you come to this -- how you come to this conclusion, let's say.

[Unknown Analyst]

I mean the 25% decline, the lower end of your revenue target for 2023 versus last year seems to me to be rather cautious to put it this way.

[Ronald Slabke, executive]

Yes, yes. Let's say, it is -- we don't want to revise it again. So that's -- and this is for the total -- it's for the total group, yes. This is all revenue, let's say, all segments and all business models. So it's -- we didn't challenge this, let's say -- yes. We wanted to make sure that everyone understands that it's a challenging year. We don't see a recovery of the market, expect that more or less is what you saw in the first 3 quarters continues.

Yes. It's not more -- it doesn't try to describe an exact number behind this -- the 25% is a rough number.

So this -- the first question was do we expect goodwill to be -- not what things were for [indiscernible] in a negative sense to be realized. No, we don't do because we don't change our long-term outlook for these business models right now. The current turbulence this business model is in -- is nothing that affects our long-term perspective on the business model.

So your second question, I -- the second was if we expect already significant cost reductions in the fourth quarter, let's say?

[Unknown Analyst]

Annually -- the annual cost savings expectations for the real estate platform due to the current restructuring?

[Ronald Slabke, executive]

I would say for the total segment numbers, it's -- the costs -- the cost savings of our valuation business is not relevant. It's compensated as well by a certain increase of costs in growing business models there. So on a segment basis, you will not see a significant change in the fourth quarter. And for next year, I would say it's -- it may as well be compensated by growth in other product areas. So I would not say too much changes there.

[Unknown Analyst]

Okay. And last question was on the release of the earn-out component. Will it be tax-free?

[Ronald Slabke, executive]

Yes.

[Operator]

And our next question comes from the line of Philipp Häßler from Pareto Securities.

[Philipp Häßler, analyst]

I have two questions, both on the credit platform. I just wanted to make sure that I understood that correctly because revenues were stable quarter-on-quarter, but at the same time, I think you introduced the price increases. So why was there no bigger impact to be seen? Have I understood that correctly, that was offset by REM and also by the consumer loans business? And then secondly, on the guidance for the credit platform, you're guiding a slight decline. But after 9 months, revenues were down by, I think, around 30% of our calculated correctly. Is there a special reason? Or is it just -- maybe you can explain why do you expect a slight revenue decline for this -- for the credit platform for the full year?

[Ronald Slabke, executive]

Yes. Okay. I would say, yes, your -- the question of the revenue stability versus plus [ 30% ] transaction volume that has come from the other product areas is true plus this what I just mentioned about the change in duration, which was pretty intense in the third quarter -- so I think I think in the [indiscernible] period, which led us well to a couple of percent of less revenue. And we increased the price for the broker business by an average 20%. And let's say, this -- how to say, this was compensated by a lot of other developments and lost visibility on a quarterly basis. And to be fair, but this is really getting minor products calculated before the price increase, we are not affected by the price increase even when the transaction was closed than in the third quarter, but calculated in the second quarter already. So you have as well in the beginning, a couple of weeks of transition period between the two pricing models, for instance.

[Philipp Häßler, analyst]

So that we should see a bigger impact in Q4?

[Ronald Slabke, executive]

I hope not compensated by a lot of other things.

[Philipp Häßler, analyst]

Sure. like-for-like, there should be a positive impact, or a bigger positive impact in Q4.

[Ronald Slabke, executive]

Like-for-like, it's just there. Yes.

[Philipp Häßler, analyst]

Okay.

[Ronald Slabke, executive]

So second question was regarding the outlook and the question what is a slight decline to be fair, is, let's say, we see this -- we see a certain level of uncertainty, especially with the corporate finance business, which is heavily closed in the last quarter. So there is an uncertainty of our revenue numbers for the whole segment, even then the mortgage business and the personal loan business is pretty well predictable. And we didn't revise this because we thought this as a minor topic on a segment level. But yes, the wording -- let's say, a slight decline in revenue is -- you can discuss this.

[Operator]

[Operator Instructions] And as we do not have any more questions registered, I now hand back to our speaker for any closing comments.

[Ronald Slabke, executive]

Thanks for the question. As I said in the beginning, we would hear from you some feedback if an English only call is an acceptable, fine for you, or if you would prefer to have a German in the future as well. So I'm heading to investor conference now. There's a lot ongoing right now in the market and in Hypoport. So we will close this year as good as possible. And we are prepared for the near-term future. So we will hear again here latest in the beginning of March and talk about how we are going to tackle this -- achieve this growth, which is expected from us from hereon, double-digit growth every year. And with some headwinds in addition, a fast new record -- coming for Hypoport. So I look forward to talk to you here and have a good time in the [indiscernible].

[Operator]

This now concludes our conference. Thank you all for attending. You may now disconnect.