Germany Investment Briefing Real Asset Live, Live Online Event: UK Timezone | 09:30 - 12:30

‘Germany’s safe haven status confirmed’

Germany will retain and even strengthen its position as Europe’s safe haven, experts agreed at Real Asset Media’s Germany Investment Briefing, which was held online yesterday with a record number of delegates from 25 countries.

‘There are three reasons why Germany will retain its safe haven status,’ said Marcus Lemli, Chief Executive Officer of Savills Germany and Head of Investment Europe, Savills. ‘First, the solid healthcare system, good capacity and strong response to the epidemic; second, unemployment will be lower than in other European countries and third, it is a country with significant fiscal firepower and capital will be put to work wisely to keep the economy going’.

This confidence in Germany’s prospects is echoed by a flash poll conducted by Real Asset Media among delegates: 53% of respondents believe the country will retain its status as safe haven during and after the current crisis, while 37% think it will become even more of a refuge for capital and only 10% see it losing its appeal.

‘Germany is export-oriented and therefore dependent on other countries, but the measures taken by the Government are stabilizing and strengthening the economy,’ said Matti Schenk, Associate Research, Savills Germany. ‘I don’t think the positive picture for Germany will change. There will be a rebound’.

In the short-term the German economy and the property market will be hit by the consequences of the COVID-19 epidemic, but strong fundamentals and good governance will pave the way to a rapid recovery.

‘There will be a dip during the lockdown, but as soon as the recovery comes we expect a return to normality because there is a lot of liquidity in the market,’ said Rainer Nonnengässer, CEO, International Campus.

The market has changed dramatically in Germany in the space of a few weeks.

‘Germany recorded the strongest opening quarter in its history, with a record €27 bn transaction volume in Q1, which pointed to a €100 bn figure for the year’, said Schenk. ‘But this is already history. It is a new world now, as Covid-19 marked the end of the positive run and changed almost everything’.

Demand and supply have been affected by the lockdown measures put in place to combat the epidemic. Germany’s GDP will decline by 7% this year, according to the IMF, while the authoritative IFO institute predicts a fall of anything between 7% and 20 per cent.

‘While it is difficult to make predictions, it is clear that demand for real estate is set to decrease substantially, at least in the short term,’ he said. ‘There are no rental increases on the horizon, and over the next month investment activity will decline significantly, although deals at an advanced stage will still go through’.

Savills data show that the number of transactions at the end of February – around 600 – was in line with the first two months of 2018 and 2019, but there was a marked slowdown to below 500 in March.

Financing is also becoming an issue. ‘Banks are still open for business but they are more cautious, funding costs are higher, liquidity is becoming more expensive,’ said Holger Schmalfuß, Senior Originator International Investors, Berlin Hyp. ‘Syndication is very difficult, especially for prices agreed before Covid-19’.

However, ‘many investors have their pockets full of money and they want to buy, which is why I don’t see prices changing for high-quality assets,’ said Tobias Schultheiß, Managing Partner, Blackbird Real Estate.