Market Trends
What’s a better time to invest, if not now?
Franz Pöltl FRICS
Managing Partner EHL Investment Consulting GmbH
The pros and cons: The current market distortions create opportunities to locate properties that are not easy to find in normal economic phases. But there is one not-so-small piece of bad news. Only investors with plenty of equity can take advantage of these opportunities.
Applying the old stock market truism – “buy in times of war” – to the real estate market in general and to the investment property market in particular means the time has come to consider new
is not reason enough to buy. Much more important is the decline in purchase prices – meaning in absolute terms – to a very solid level. Particularly worth mentioning
The main reason for this weak momentum is the current lack of sufficient financing. Compared with historical trends, banks are currently requiring comparatively high equity ratios (seldom much lower than 50 per cent) for investment property financ- ing. Experts working with this business model are generally not liquid enough after three extremely challenging years or are holding back because of well-filled project pipelines – and this vacuum will open investment opportunities for other, high net worth investors. However, there is no particular reason to hurry. Banks will be preparing to sell a large number of properties from non-performing loans in the coming 18 months, and this will increase the overall supply. A rapid turnaround in prices can, as a result, not be expected and will presumably lead to attractive opportunities for high net worth buyers up to 2026.
Yields have increased signif- icantly in all submarkets. In many locations, initial yields are again distinctly higher than the yields on ten-year government bonds.
investments. The market was virtually flooded with negative news for the past three years, but prices have now declined and potential buyers can choose from a rich supply of widely different properties.
This estimate may seem risky after three extremely difficult years, but is absolutely justified considering the actual situation. Yields that were more or less neglectable in boom times have risen significantly in all submarkets. In many locations, initial yields are again distinctly higher than the yields on ten-year govern- ment bonds.
is the stability and slight upward trend in the purchase prices for apartments. This development has pushed the difference between the square metre price for entire properties and condominiums in the same building to a historical high. The separation and sale of individual units is currently a very attractive business model, but this obvious fact has not yet revived buyers’ interest.
This may be interesting in its own right but
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Investment Property Report
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