Falling costs on the true property market – no finish in sight | EUROtoday
AAccording to a very powerful financiers, there may be nonetheless no finish to the disaster in sight on the German actual property market. In the fourth quarter of 2023, based on information from the Association of German Pfandbrief Banks (VDP), residential properties fell on common by 1.6 % in comparison with the earlier quarter. Compared to the identical interval final yr, there was a minus of 6.1 %, reported the affiliation, which represents, amongst others, Deutsche Bank, Commerzbank, Landesbanken and enormous financial savings banks.
In industrial actual property, the place places of work particularly are underneath strain as a result of dwelling workplace pattern, the affiliation recorded worth drops like by no means earlier than on this space. The issues are more and more affecting banks.
The figures printed on Monday present that the stabilization of the true property market is taking longer than many anticipated. Prices have been falling since mid-2022. “A turnaround in real estate prices, which is often the subject of public speculation, is not yet foreseeable,” stated VDP common supervisor Jens Tolckmitt. “2024 will remain difficult for the time being.”
Prices in metropolises are considerably extra steady
The VDP actual property worth index relies on information on transactions from greater than 700 banks and is extra significant than analyzes primarily based solely on commercials. Because when promoting actual property, negotiations happen and deviations from the provide worth are frequent.
The primary cause for the drop in costs is elevated rates of interest, which make actual property financing dearer. Many folks can now not afford to purchase them. Investments are now not worthwhile for giant buyers. According to the Kiel financial analysis institute IfW, costs for residential property in Germany fell to a historic extent final yr. Official information for the fourth quarter remains to be pending.
According to the VDP, on the finish of the yr costs for multi-family houses had been as soon as once more underneath barely higher strain than for owner-occupied residential property. In the seven metropolises, the typical worth decline was simply over 5 % in comparison with the identical interval final yr, which was decrease than the nationwide common. The largest minus was in Munich and Frankfurt with a superb 6 % every, the bottom in Cologne (4.4 %) and Düsseldorf (4.8 %).
Turbulence surrounding industrial actual property reaches German banks
The actual property market was nonetheless in a downturn at first of the yr, stated Tolckmitt. Residential property costs will be anticipated to stabilize in the summertime, however industrial property costs won’t stabilize earlier than the top of the yr.
For industrial properties, the VDP recorded traditionally robust declines on the finish of 2023, with costs falling by 12.1 % in comparison with the identical interval within the earlier yr and 4.9 % in comparison with the earlier quarter. Because the house workplace pattern means fewer places of work are wanted, actual property in lots of nations is underneath strain, which is especially placing a pressure on the steadiness sheets of US banks.
The disaster is now additionally reaching German banks. Deutsche Pfandbriefbank needed to enhance its threat provisions in opposition to crises within the fourth quarter and lately tried to reassure buyers with a press release on its liquidity place.
Deutsche Bank is relatively closely concerned within the American industrial actual property market. It has granted loans for round 17 billion euros for US industrial actual property, 7 billion of which for places of work. The monetary establishment will be capable of address defaults on loans for US industrial actual property, CFO James von Moltke lately stated. However, they’re more likely to be increased within the first and doubtless second quarter than Deutsche Bank would really like. At the identical time, the institute identified that the US workplace portfolio solely makes up 1.5 % of the whole mortgage ebook.