Banks are looking for space in Frankfurt

There are three reasons why Louis Hagen, Chairman of the Munchener Hypothekenbank and President of the Association of German Mortgage Banks (VdP), sees no risk of a property price bubble in Germany, according to the Frankfurter Allgemeine Zeitung and Die Welt.

Firstly, Hagen pointed out that not all regions have registered rapid property price increases. Even in cities like Berlin, Hamburg and Munich, high rental prices in the newbuild segment have not necessarily been matched by high rents in the existing rental property sector.

Secondly, price increases have been driven by population growth, the ongoing trend towards urbanisation, and strong economic fundamentals, combined with historically low interest rates. At the same time, Germany’s rental housing sector has seen vacancy rates fall close to zero.

Finally, loan-to-value ratios are typically no more than 75%, which underscores the financial soundness of the German market.

The latest empirica price index has shown that rental prices in all major cities, with the exception of Hamburg, continued to increase through Q1 2017, according to the Immobilien Zeitung. Analysis has also revealed a moderate slowdown in the rate at which prices for newbuild condominiums outside Germany’s largest cities are rising, despite the fact that prices have increased by an average of 6.4% over the last 12 months. Nationally, purchase and rental prices in the newbuild segment increased by an average of 7.7 and 3.8%, respectively, over the same period. Prices for one and two-family houses rose by an average of 7.1%, nationally. A second study, published by Project Investment Gruppe, confirmed empirica’s analysis and reported 9.8% growth in prices for newbuild condominiums in Berlin last year, with 4.9% in Munich, 9.1% in Hamburg, 6.2% in Frankfurt, 7.5% in Nuremberg, and 14.3% in Cologne. According to Project, the country’s most expensive condominium was in Berlin, with an asking price of EUR 19,028/sq.m.

According to Knight Frank, the number of ultra-high-networth individuals is growing constantly, with 45% more billionaires in 2016 than just ten years earlier. Most live in the US, followed by Europe and Asia. Asia is forecast to close the gap over the next couple of decades and will draw level with the US.

According to Bianca Passlack from Zabel Property, 55% of those buying condominiums in Frankfurt’s ‘Grand Tower’ are overseas buyers: “Our buyers come from 21 different countries.” Zabel Property organised a successful roadshow to present the ‘Grand Tower’ in seven cities in Asia and the Middle East, including Dubai, Doha, Hong Kong and Shanghai, and will soon be moving on to Istanbul. Bewocon’s Karl J. Zeller, who will soon be marketing what is planned to be the highest residential tower in Berlin, ‘Alexander’ at Alexanderplatz, made a similar point: “A penthouse with five-metre ceilings 150 metres above Alexanderplatz needs to be marketed globally.” This requires both discretion and a global network, and Bewocon has also enrolled a number of VIP partners.

Meanwhile, a Bloomberg News survey of real estate service companies has revealed that banks have already started looking for suitable office space in Frankfurt. Although the “Brexit effect” many market observers were expecting to hit in Q4 2016 failed to materialise, the situation “changed dramatically in the first quarter of this year,” said Carsten Ape from CBRE: “Banks are now seriously weighing up potential sites.” According to the major real estate service companies, it is primarily major banks that are on the lookout for office space in Frankfurt, namely those banks that require the kind of large offices that are not so easy to secure at short notice.

The latest bulwiengesa survey of property developers has found that the number of office developments planned and under construction in Germany’s Top Seven cities has risen significantly for the first time since May 2009. Within the space of a year, the number of office developments rose by 8.3%, with the greatest growth seen in the number of developments at the planning stages. Property developments in the housing sector increased by 4% over the same period. Berlin held its position as the fastest growing market, with a plus of 622,000 sq.m. and strong growth of 10% in both office and housing developments. Between 2014 and 2021, completions are set to total some 8.6 mln square metres in Berlin, twice the volume of space due for completion in Munich or Hamburg. Germany’s three largest property developers are the Zech Group, CG-Gruppe and Bonava.