Round Table: Reconstruction
years. “In the past, we were able to realise impressive value growth without major measures within a few months. Now we really have to work for our money.” In conclusion: This is a good time for professionals who know the market and the operating real estate business because they can buy at reasonable
This investment strategy also had its own logic because the most important financial indicators (the 10-year swap and the ratio between risk-free returns on the financial market and the realisable rental return) were okay for more or less two decades. The return generated by the property was higher than the financing costs. This situation only turned with the ECB’s fast track drive to raise interest rates by four per cent. With all due respect, the (andoubtedly active) opportunistic buyers were unable to predict this development.But to answer your question – where do we stand now? We have entered an unusual and very exciting market phase. The second major geopoliti- cal conflict, this time in the Near East, has triggered another upward shift in interest rates and, due to the slow adjustment of real estate yields to the “new” interest level, led to a negative spread between risk-free interest rates and prime yields on the Vienna investment property market. In other words, this can give me a higher return with no risk than I can earn with real estate. And that is normally a clear indicator of falling prices. At the same time, the Vienna market is confronted with a housing shortage of a scope not seen in ages. On the one hand, that means financial indicators are a sign of falling prices but, on the other hand, the iron rule of supply and demand points to exactly the opposite on the rental side – and is a typical buy signal. This makes the situation so interesting and challenging, and pricing very difficult. All in all, I think an investment in the housing market is worth considering because, at the end of the day, supply and demand are the decisive factors. And interest rates will settle down, at the latest when one of the major conflicts, or maybe both, finally end. With a reasonable equity ratio and a bank landscape that is again willing to lend, I see
In reality, what we are currently experiencing is a perfectly nor- mal market correction.
prices. The requirements are sufficient equity together with the readiness and capability for intensive development work. Markus Fellner: In my opinion, the market was long overdue for greater professionali- sation and this is what we are now witnes- sing. The scene was previously hijacked by a number of mathematical wizards whose only skill was applying their “three months = 30 per cent return” formula. That was enough to trade the properties and move on to the next project. The “separate and sell” business model mentioned by Franz Pöltl naturally influences the market, but the analysis shouldn’t completely ignore rents. They are the financial foandation of a building and can be strengthened and expanded through active management. Pure traders don’t have this expertise, they normally “pretty up” an investment property and sell it to another trader after three months. Fortunately, professional investors are returning to the market. We are, however, also seeing attempts by other, previously failed investors to regain a foothold on the investment property market. Whether this will work depends to a significant degree on the banks and their approach to financing these types of projects. It could
– Bernd Winter
a positive trend over the medium term.
In other words, a very optimistic vision. But isn’t the current market phase a good time for investors who are prepared to accept high short-term risks? Or is it something for investors with a long-term horizon? Franz Pöltl: A look at our current customer structure is a very good answer. We have private investors, generally with considera- ble equity, who develop a certain emotional tie to their properties. They are, however, definitely in the minority. Yield-driven investors represent the larger share by far. High yields are possible on the investment property market, which is generally subject to the full application of the Austrian Tenancy Act, and less realistic through rentals. That means many investors have started to purchase properties with the intention to implement value-creating measures as a first step to later separating and selling the individual apartments as condominiums. Both know-how and a great deal of work are required here over many
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