The sharp rise in lending rates and the mood of crisis are leaving deep scars on the real estate market. The investments of large investors in residential real estate collapsed at the beginning of the year, as the real estate specialist Jones Lang LaSalle (JLL) announced on Wednesday in Frankfurt. In the first quarter, the transaction volume in Germany fell by almost half – to around 2.1 billion euros.
For example, purchases and sales of residential portfolios – i.e. packages consisting of numerous residential units – were considered. In the same period of the previous year, the transaction volume was still four billion euros. Viewed over five years, the decline is even greater at two-thirds, according to JLL.
Buyers and sellers have not yet fully adjusted to the consequences of rising interest rates, even if price expectations are approaching, it said. Accordingly, 39 deals were counted in the first quarter, around half as many as in the fourth quarter of 2022.
In order for the market to revive, the strongly fluctuating interest rates would have to stabilize and the uncertainty on the capital market would have to recede. In addition, there were no “signal-effective transactions” from listed housing groups, said JLL expert Helge Scheunemann.
Irrespective of this, the gap between housing supply and demand is likely to continue to widen, according to JLL’s forecast. Because of high construction prices and sharp rises in interest rates, many projects would be canceled. The real estate specialist expects 230,000 to 240,000 apartments to be completed this year – far away from the federal government’s former target of 400,000 new apartments per year. At the same time, the population is growing due to high immigration, including from the Ukraine, and with it the demand for housing. The pressure on rents is likely to remain high.
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