German banking association predicts continued price decline of real estate – Business

German banking association VDP predicts more price declines across all real estate asset classes this year, with office prices hit particularly hard by slower economic growth and trends towards working from home.

The value of office buildings could fall between 5% and 10% in 2024, VDP, which represents German real estate lenders, said in a statement on Monday, Bloomberg reported.

Retail and home prices are expected to fall by 7.5% and 5% this year, respectively.

Although central banks are signaling that the time for interest rate cuts is approaching, the VDP does not expect an end to the price decline in commercial real estate until at least the end of this year.

“The financial year 2024 will definitely remain a challenge for all players in the real estate markets,” stated VDP President Gero Bergmann.

The real estate crisis, fueled by multiple interest rate hikes, has hit commercial real estate harder than residential, as sluggish economic growth and telecommuting trends mean office demand remains weak.

Commercial property prices fell 12.1% in the fourth quarter of 2023 compared to the same period a year earlier.

The volumes of real estate lending by specialized banks significantly decreased as a result of the market downturn and reduced demand from investors.

In 2023, German housing loan banks (Pfandbriefbanks) lent a total of 110 billion euros, significantly below the 160 billion euros lent a year earlier.

Working on the publication: Yavor Rimski

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