Opportunities and stability on the property market despite changing market conditions

The property market: an in-depth look at current developments

Macroeconomic factors such as inflation and key interest rates have dominated discussions about property investments since 2022. But what impact have the past few years really had on the property industry and what trends are now discernible?

If there is talk of a property crisis

We are currently hearing a lot about a supposed property crisis. But is it really a crisis? A crisis would be characterised by four main features: Rental prices, demand for space, property values and the financing situation. A closer look reveals that not all of these characteristics are fulfilled. From the perspective of long-term investors in particular, there are certainly positive developments.

Challenges posed by interest rate policy and inflation

It is undeniable that interest rate policy and measures to combat inflation are having a significant impact on property values. Project developers in particular are currently facing price markdowns as it takes time to adjust property yields. However, the situation is less problematic for long-term owners who are under no pressure to sell. Investors continue to benefit from stable yields and long-term rental agreements despite the turnaround in interest rates.

Financing pressure distributed differently

The financing situation poses different challenges for different market participants. Project developers who have pre-financed their construction projects with short-term loans must now face the challenge of new financing. However, long-term investors who concluded their financing in the second half of the 2010s are less affected by the current interest rate movements.

Positive developments in rents and demand

There are also encouraging developments in the current market situation. Rental prices and demand for modern, marketable properties remain positive. We are not experiencing a fall in rents; index-linked rental agreements mean that rent increases can be realised in line with the inflation rate. Demand for space also remains stable, with an occupancy rate of around 95 per cent and rising.

Opportunities in various types of utilisation

The different types of use - residential, healthcare, retail and office - offer different opportunities:

1. Living and healthThese asset classes benefit from two megatrends: urbanisation and demographic development. The demand for living space and care places is increasing sustainably, particularly in urban regions and due to the ageing population. These trends are strongly decoupled from economic fluctuations and offer stable long-term income opportunities.
2. Retail tradeLocal grocery stores in particular have proven to be especially resilient. Despite crises, sales are stable to rising here, as basic foodstuffs are always needed and savings are virtually impossible. Even during the coronavirus pandemic and despite inflation, demand remained high.
3. Office propertyDespite the trend towards working from home and more flexible working models, we have not experienced a dramatic slump in demand. Modern office space in good locations still has solid letting prospects.

Strategic orientations and investments in the future

Topics such as ESG (Environmental, Social, and Governance) and the digitalisation of consumption recording in properties are focal points and will remain so in the future.

Conclusion

Property remains a valuable capital investment, especially in times of economic uncertainty. Long-term investors benefit from stable rental prices, sustained demand and the particular advantages of the various types of use. In our property webinar, we show how stable returns can be achieved through targeted strategies and broad diversification, even in challenging market phases.

Kind Regards

Matthias Holzmann