According to Hamburg Commercial Bank (HCOB), project developers in particular are currently facing major challenges. The reasons for this are price increases, delivery bottlenecks, construction delays and higher financing costs. "We are noticing a clear reluctance on the part of developers, and already almost a third of project developments are being postponed," says Peter Axmann, Head of Real Estate Clients at Hamburg Commercial Bank.
However, changes are becoming apparent not only in new construction properties, but also in existing properties. According to HCOB, rising interest rates and stagnating rents are ensuring only very slight increases in value - if any at all. HCOB also describes two possible future scenarios. In the first scenario, the so-called "soft landing," rents and prices in Germany would remain relatively stable due to moderately rising interest rates and an imminent recovery of the economy.
In the second scenario, combined with a massive rise in interest rates and so-called stagflation, a combination of economic stagnation and inflation, value corrections of 20 to 30 percent would be possible, according to HCOB. Current developments are already causing banks to become stricter in their lending practices. For example, financing standards are being tightened and customers must be able to raise more equity for real estate investments.
Source and further information: hcob-bank.de
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