According to Hamburg Commercial Bank (HCOB), project developers in particular are currently facing major challenges. This is due to price increases, delivery bottlenecks, construction delays and higher financing costs. "We are noticing a clear reluctance on the part of developers, with almost a third of project developments already being postponed," says Peter Axmann, Head of Real Estate Clients at Hamburg Commercial Bank.
However, changes are becoming apparent not only in new-build properties, but also in existing properties. According to the HCOB, rising interest rates and stagnating rents are ensuring very little - if any - growth in value. The 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 economic recovery.
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 when granting loans. For example, financing standards are being tightened and customers must be able to provide more equity for real estate investments.
Source and further information: hcob-bank.de
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