Germany property market declines as foreign investment drops

Germany’s property market, once a beacon of stability, is facing its worst crisis in a generation, with international investors pulling back, Reuters reported on Tuesday.

Data from BNP Paribas Real Estate shows that foreign buyers accounted for only 35 per cent of commercial real estate purchases in the first quarter, the lowest since 2013. This comes amidst a 70 per cent drop in sales volumes from pre-pandemic levels.

Kurt Zech, a leading German developer, warns that the market will continue to struggle until foreign investors return.

The downturn in the property sector, which contributes roughly a fifth of Germany’s output (€730 billion or $793.51 billion annually), began when the European Central Bank raised borrowing costs due to rampant inflation.

The first quarter of 2024 saw commercial property prices fall by another 9.6 per cent, following a 10.2 per cent drop in 2023.

High energy costs, weak global demand, a shift towards net-zero economies, and increased competition from China are challenging Germany’s economic model. The nation’s strong industrial base is reportedly on the verge of cracking.