The German point of view: Game over?
It is already clear that a prolonged period of increased economic and political uncertainty is likely to have a significant negative impact on the British real estate markets. This is in part demonstrated by figures released by the Bank of England in April, showing the lowest level of new mortgage business in the last eleven months. This was revealed by Die Welt on June 22.
George Osborne, Britain’s Chancellor of the Exchequer, predicted back in May that UK house prices could potentially fall by between 10 and 18% in the event of a victory for the leave campaign. The case for commercial real estate is similar. According to CBRE, only GBP 14 billion, or EUR 17.68 billion, was invested in British commercial properties during Q1 2016 – 21% less than the prior year’s opening quarter. “73 percent of commercial real estate investors believe that Great Britain will become a less attractive investment destination in the event of Brexit,” said CBRE’s Simon Barrowcliff. Now that the Brexit decision has been confirmed, this trend could easily gain in momentum.
Representatives of Germany’s real estate industry expressed their concerns for the British market, while also now expecting German property values to increase substantially.
“It’s too early for anyone to seriously predict the consequences of this Brexit decision. Nevertheless, as an investment safe haven, Great Britain has definitely been rattled and is now down for the count. This could certainly further enhance the attractiveness of the German real estate market. Investors who have tended towards London in the past are going to be giving more serious consideration to Berlin now that the referendum results are in,” commented Jakob Mähren of the Mähren Gruppe.
Jacopo Mingazzini from Accentro Real Estate AG takes a similar view: “This decision won’t just have a massive impact on the stock markets, it is also going to have far-reaching consequences for the real estate markets. I expect that the demand for residential real estate, especially in Berlin, will continue to rise.”
Manfred Binsfeld from FERI EuroRating Services cautioned against over-dramatising the situation. He believes that there is still plenty of life left in London: “Of course, the Brexit vote is going to put the brakes on the London property market. Cities such as Frankfurt, Düsseldorf and Paris are likely to benefit. This will primarily provide a boost to office markets, but residential markets will receive a secondary boost. However, it is important not to overstate the positive impacts of Brexit on Germany’s real estate markets. London will still be playing in the champions’ league as a global financial centre. In the long-term, demand for housing in London will remain high, and the imbalance between supply and demand will continue to put pressure on the market. International investors will soon realise this, especially once the markets have absorbed the shock and returned to some semblance of normality in a few weeks’ time.”
Wertgrund’s Thomas Meyer does not believe that the referendum result will have immediate negative consequences for Germany – as long as Brexit doesn’t start a chain reaction across the EU: “In the short-term, we don’t believe that Brexit is going to have any serious negative impact on Germany’s property markets. Our major cities are still growing, which means that demand for housing will remain stable. It is also quite unlikely that British investors will withdraw their capital from Germany. In actual fact, their German investments are now even more valuable in terms of portfolio and currency diversification. Still, if more European countries jump on the EU-exit bandwagon, Germany’s housing market would face serious long-term risks.”
Ulrich Jacke from Dr. Lübke & Kelber takes an optimistic view of events: “Early this morning, just a few hours after the Brexit announcement, we had already brokered a EUR 10 million deal for a vacant office building in Frankfurt. The buyer’s decision was explicitly based on their expectation of significant growth in demand for office space in Frankfurt following the UK’s decision to leave the European Union.”
Brexit is already having condominium market. This Tagesspiegel on June 21.
“Berlin has become the market of choice as an alternative to London. Not just because residential property offers relatively good value here, but also because the threat of Brexit has unsettled investors. Over the last eighteen months we have observed growing international interest in Berlin, especially from buyers ready to invest between EUR 500,000 to EUR 700,000 Euro in a condominium in the city,” commented Thomas Zabel of Zabel Property AG.
Many investors are also responsible for creating new jobs in Berlin, as they bring part or all of their businesses to the city with them. The luxury segment of the market is particularly sensitive to international developments, especially as wealthy international buyers invest in the relatively young market for condominiums of EUR 5,000 to EUR 6,000 per square metre.
“Brexit will cause demand for residential real estate in Germany to pick up, which will also result in higher prices. Those international buyers who have been waiting for the final result will now turn their backs on London,” believes Zabel. an impact on
was revealed Berlin’s by Der