Foreign investors are shying away from German property deals, exacerbating the country’s worst real estate crisis in a generation. According to data from BNP Paribas Real Estate, foreign buyers only accounted for 35% of commercial real estate purchases in the first quarter, the lowest percentage since 2013. This decline comes amidst a 70% drop in sales volumes compared to pre-pandemic levels.
The situation has sparked a debate about whether Germany is once again becoming “the sick man of Europe,” a label it worked hard to shed in the late 1990s. Factors contributing to this economic downturn include Germany’s transition away from Russian energy sources, bureaucratic challenges, and the rise of far-right politicians.
Kurt Zech, a prominent German developer, believes the market will continue to struggle until foreign investors return. He emphasized the importance of American investment firms like Blackstone, BlackRock, and Morgan Stanley re-entering the German market to signal a bottoming out of the crisis.
The decline in property prices, financing challenges, and stalled projects have led to a 9.6% drop in commercial property prices in the first quarter of 2024. This downward trend is expected to continue, with the VDP banking association predicting more pain ahead.
Despite the challenges, some industry experts see potential in the German market. However, hurdles such as decentralized design, reluctance to slash property prices, and deals made under duress pose significant obstacles to a swift recovery. Property tycoon Kurt Zech remains optimistic, urging banks to continue funding projects and highlighting the presence of promising opportunities for foreign buyers in Germany.