Everything is different this time
Expo Real is over and, following the stress of the trade fair, everyone is returning to the frenzy of workaday life. What can we take with us from Munich? Where does the German real estate sector stand as 2015 draws to a close? A new transaction record is expected; forget about 2007 – everything is different this time. At its own opening event, the chief of a major bank was heard to say, “We don’t have a bubble, we have an upward correction!” And the banks? To quote the CFO of a housing association on the matter: “The banks are throwing money at you!”
This mood, bordering on euphoria as it does, leads to questions regarding the soundness of the real estate market and the various opinions expressed about it during the course of the Expo. Some see the current market developments, where prices are increasing on practically all fronts, as a product of ECB-driven low-interest politics. This spurs on the fear of overheating. It’s all too good to be true. Others feel that everything could be so much better, if the limited available supply wasn’t primarily concentrated in metropolitan regions.
Irrespective of how one rates the sustainability of current developments, demand is high and supply is scarce; the market is booming. There is a focus on project developments; we could also observe this during the trade fair. The sellers have the whip hand. Transaction completion periods are becoming ever shorter. There is often no time left for detailed property checks. Added to this, the limited supply means that investors are increasingly turning to B and C-class locations or to the value-add segment. Acquiring complex properties at difficult locations in a short timeframe – it simply isn’t possible without strong partners involved in the review. These developments, the new (housing) construction boom and the interestsavings that are invested in repairs are good news for service providers like VALTEQ.
There also seems to be a perceivable quickening of the personnel carousel, as the good market position is evidently animating people towards a change of job. At the same time, the sector is seeing an acceleration of the concentration process. Firms are being taken over; major market players are emerging; small and medium-sized offices are disappearing. Is the M&A frequency an indication of the end phase of a market cycle? Or is everything really different this time? We will know by the next Expo Real at the latest.
Dr. Thomas Herr, Managing Director of VALTEQ Gesellschaft mbH