International investors are no longer bullish on Germany’s real estate sector.
According to BNP Paribas Real Estate, fewer real estate investors are making transactions in Germany than before. Specifically, foreign investors are shying away from an investment. Only 35% of foreign buyers made up the commercial estate transactions last quarter. This is significantly fewer compared to the real estate investors from other countries.
Kurt Zech, a leading figure in German development, has underscored the critical role foreign investors must play in rejuvenating the market and instilling confidence among industry players.
The significant drop in commercial property prices by 9.6% in the opening quarter of 2024, following a 10.2% decrease in 2023, highlights the severity of the challenges confronting the sector.
A huge part of why this is happening is the higher interest rates imposed by the European Central Bank.
Now that foreign investors are pulling out, several ongoing projects are caught in the crossfire. Citizens are now asking the government to intervene and help revitalise the struggling real estate market.
The worst-case scenario here is that Germany will no longer be able to sustain its economic model.
How long will this take? Nobody knows. But, what’s clear is that the Kremlin has to find a way to prevent the situation from getting a whole lot worse.