Germany’s real estate market took a deep hit in the fourth quarter as investors shied away from deals on the back of soaring financing costs.
(Bloomberg) — Germany’s real estate market took a deep hit in the fourth quarter as investors shied away from deals on the back of soaring financing costs.
Total investments in the country’s commercial property sector only reached €9.9 billion ($10.6 billion) in the last three months of 2022, a decline of 50% compared with the five-year average for the period, according to a report released by BNP Paribas’ real estate unit on Monday. The development is largely due to soaring interest rates, a weakening economy and record inflation, it said.
The worsening environment meant “that many large transactions that already were at marketing stage did not take place” as rising financing costs drove a wedge between pricing expectations of buyers and sellers, Marcus Zorn, chief executive officer of BNP Paribas Real Estate Germany, said in the release. The trend would likely continue during the first half of 2023 but would reverse in the second half, he said.
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A similar dynamic is taking place in the market for residential real estate where the deal volume for the full year collapsed by 74% compared with 2021, BNP said in a separate press release.
Europe’s real estate firms are grappling with a plunge in valuations and dealmaking after the European Central Bank and other monetary policy makers rapidly increased interest rates in 2022, bringing to a halt a boom in asset prices that had lasted for more than a decade.
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