Alternative financiers likely to be winners after pandemic - iddiw

Germany’s small but prestigious iddiw (Institut der deutschen Immobilienwirtschaft) had its third digital Salon recently since the new online format became the norm. This time the panel focused on "Real Estate Investments as well as the Risk Aversion of banks".

In his keynote lecture, Prof. Dr. Steffen Sebastian, Chair of Real Estate Finance at the International Real Estate Business School (IREBS) at the University of Regensburg, said the "winners" of the Covid 19 pandemic could be alternative financiers who have less regulation than banks and are therefore able to react more flexibly in the crisis

"The pandemic has made it clear to many decision-makers in the real estate industry and related sectors of the economy how easily exogenous shocks can hit the sector. At the same time, everyone must be aware that another pandemic with a different virus can break out at any time. The causes of the Sars-CoV-2 outbreak are neither eliminated nor precisely known". 

In his presentation, Prof. Dr. Sebastian highlighted how investor behavior and the risk affinity of banks have also changed. Winners could be alternative financiers, which have much less regulation than banks and are therefore able to react more flexibly in the crisis. 

"Germany is - as it was after the financial crisis - the “island of the lucky ones”. Our stable healthcare system, the sometimes overloaded health services of our neighboring countries, and Brexit – all are contributing to a further surge of foreign investors into Germany. So far, we can conclude - Germany is coming through this crisis better than the rest of Europe," said Prof. Sebastian.

There followed a lively discussion, moderated by iddiw president Dr. Thomas Herr (and in his day job, CEO of proptech EVANA AG), in which delegates agreed that residential real estate would be one asset class that would be coming through the pandemic relatively well.

Concluding on an optimistic note, Prof. Sebastian outlined the shape of the year to come, in his view. "Next year, three further events are expected to affect the real estate industry: firstly, the German federal elections and a probably changed federal government. Secondly, the finalization of the implementation of the international banking standard Basel III, which will require a significant increase in the equity capital of banks. Thirdly and finally, the impact of ESG issues on the industry, which are likely to have a lasting greater impact than Covid-19," he said.

Founded in 2007 and based in Frankfurt, the iddiw is a communication platform that promotes interdisciplinary dialogue between universities, companies and public sector and political representatives.