At the beginning of the year, hope still prevailed on the property markets, but disillusionment set in during the second quarter. What many in the industry had hoped for failed to materialise – the big shopping spree.

Ken Zipse, Head of Real Estate at Berenberg Private Bank, was still confident in the first quarter of the year, but now, in the private markets podcast „Beyond Billions“ he said that it appears that „the serious part of this market phase is still ahead and a great deal of consolidation will still have to take place“. Zipse advises institutional investors and family offices as well as wealthy private clients.

There are still very few transactions, Zipse says, describing the current situation. There are assets that are still put on hold – and will have to be sold at some point. „On the one hand, there are project developers who have completed good properties but may no longer be able to sell them for the cost of production and are hoping that prices will rise again.", he notes. And then there are funds that will also have to exit at some point. However, there is still a lack of buyers, and price formation has not yet taken place.

Financing and interest rates are currently having a negative impact. There is some pressure from the banks: when contracts expire, either additional equity must be injected, or financing may have to be reduced „because the bank also wants to reduce its real estate quota a little, for example, for regulatory reasons“.

In addition, interest rates have risen: „This means that follow-up financings will most likely be more expensive for borrowers than it was before,“ says Zipse. Not much has changed so far in terms of the interest rates relevant to the property markets, namely ten-year construction interest rates. „They have actually remained the same since the interest rate rise two and a half years ago. In other words, nothing has happened on that front.“

Everyone in his industry had hoped that interest rates would go down, says Zipse. However, that did not happen, and so property prices cannot rise dramatically again for the time being. Zipse also sees no reason why interest rates should change. He assumes that prices will have to go down in some cases.

Zipse describes the situation as being characterised by large private investors and family offices as the most active buyers at present. Competition for good properties is currently lower, and although there are no extremely good bargains to be found, „it is possible to acquire good properties again in a normal competitive environment.“ Zipse sees it as positive that buyers once again have a better hand in contract negotiations. In the past, the seller essentially dictated the terms of the contract, often saying „take it or leave it" and „if you don't jump now, someone else will" – and I didn't think that was fair.“ That has changed a little now.

However, there is uncertainty in the market, partly due to global trade conflicts. „We ourselves had a rental agreement cancelled,“ says Zipse, because a potential tenant backed out due to the economic uncertainty. But he is hearing similar stories from elsewhere. Investors do not feel particularly comfortable in this environment.