Germany:50% decrease in real estate transactions over9 months

Real estate operations in Germany are frozen due to a10% price decrease and rising interest rates. Only half of the400 thousand new residential units will be built. The number of bankruptcies is increasing.

According to Savills, investments in residential real estate in Germany in the third quarter of2023 continue to remain at a historical low. "In the first nine months of the year - explains Carsten Nemechek, Director of Corporate Finance and Valuation at Savills Germany - residential property transactions reached5 billion euros. This is51% lower than the same period last year. Only in the third quarter, the transaction volume amounted to1 billion euros, with only15 transactions involving buildings with50 residential units or more. This is the lowest number since the market monitoring began in2009. In the first9 months,26,100 apartments were sold (-52% compared to the previous year)." Housing prices have fallen by10% over the year.

The mixture of factors has led the German real estate market into a deadlock. Germany is the largest real estate market on the continent, accounting for about one-fifth of the national economic production and every tenth workforce, as the Bauindustrie builders association reminds us. Unlike Italy, Germany is a country of large builders and developers, where small ownership is less common and fragmented. Real estate is often owned by real estate companies that rent and manage it, largely complying with local and regional regulations to restrain excesses in the market and ensure rental affordability. However, Germany is also a country with high building activity and regeneration. "With the arrival of a million Ukrainian refugees, the country has set itself the goal of building400,000 new apartments per year," emphasizes Marco Hegel, director of residential real estate market Savills, "but this year there may be less than half of them, although according to operators,700,000 are needed to maintain demographic growth in cities and the attractiveness of the German economy." According to the Federal Statistical Office, permits for apartment construction fell by27% in the first half of2023 compared to the same period in2022. The combination of high interest rates, rising construction costs, labor shortages, and the departure of financiers willing to refinance or issue new loans has created problems in the industry. All these costs were impossible to pass on to buyers and renters due to economic unfeasibility and legislative restrictions.