Real estate investors flee 'overpriced' Germany

Eight-hundred professionals at investment houses, banks and building firms told the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC) in a survey published Monday they still valued Germany's stability, but were looking elsewhere in Europe for property prospects.

Lisbon, Portugal's capital, was top-ranked in the report "Emerging Trends in Real Estate Europe 2019" because of its above-average returns and high growth potential, including projects to provide office space.

Despite soaring prices, the German capital Berlin came in second, with Frankfurt, Hamburg and Munich all making the top ten.

'Overpriced'

However, opportunities for "really attractive investments" in the big German cities had become "increasingly rare," said PwC real estate expert Susanne Eickermann-Riepe.

Survey respondents had described pricing in urban hubs in Germany and elsewhere in Europe as "near the peak," well advanced" and "overpriced," she said.

Purchases in Germany between October 2017 and September 2018 amounted to €65 billion ($74 billion) — down 3 billion on the previous 12 months.

Real estate investment in Berlin amounted to €8 billion despite its prices "going through the roof."

Every second euro invested in German real estate projects priced individually above €10 billion had come from foreign investors, according to the Association of German Mortgage Banks (VDP).

"Sentiment is more negative on cities and countries facing higher (geo)political risks," wrote Lisette van Doorn, the head of ULI's Europe branch.

Capital was still flowing into Europe, especially from Asia, but a lack of suitable assets was "one of the main barriers to investment," said van Doom.

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Britain still drawcard

Britain – despite Brexit – summed highest for real estate investment at €68 billion ($77.6 billion) over the 12 months through to September, the survey found.

Of that, London, accounted for 20 billion "at odds with the increasing volume of concern expressed by many." For 2019, investors expected British prices to sink.

Niches with 'social value'

A "remarkable shift" to "niche" sectors had occurred over the past five years, added Gareth Lewis, head of real estate research at PwC - reflected, said the report, in the "growing influence of social value alongside financial returns."

Residential developments stood out, said Lewis, "ranging from co-living, student housing, retirement living to social housing and regular residential housing."

Other attractive niches were data processing centers, flexible office space for e-commerce, while traditional formats such as suburban offices and retail outlets continued to languish, Lewis said.

ipj/rt (dpa, AFP, Reuters)

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