The property sector is still in crisis. You can see this not only when you walk past one of the major construction sites that are currently at a standstill. The persistently difficult situation can also be seen in the behaviour of property companies, project developers, investors, banks and consumers. Companies are filing for insolvency, making distress sales and investors and consumers are revising their purchasing decisions. The list of negative factors that continue to fuel the crisis is long: high construction costs and interest rates, falling purchase prices in some cases, subdued consumer sentiment, increased financing costs and falling fair market values are some of the aspects that our current issue of the Real Estate Bulletin looks at.
A spark of hope: the interest rate cut
However, there is still hope in the property sector that interest rates will fall soon. After ten increases, the European Central Bank has kept the key interest rate constant since the end of 2023 - albeit at a consistently high level. Analysts are predicting a gradual reduction this year and next. The inflation rate is also expected to fall further. This would strengthen purchasing power again and owners would be able to obtain sufficient time and appropriate financing from banks to bridge this market phase.
Until then: Restructure
However, players in the property sector should not rely on this hope being fulfilled - especially as the geopolitical situation remains tense. Instead, it is advisable to adjust the strategic direction now. Restructuring is the key term at the moment and runs through many of the articles in our Real Estate Bulletin. For example, project developers that have run into difficulties should introduce structural measures to secure liquidity so that they can safeguard their existence and ability to service capital. To make these transformation processes more efficient, data-driven decisions based on real estate analytics and business intelligence can be incorporated. Effective cost and risk management is also essential. However, we are also looking at how investors and banks are reacting to the uncertain times of crisis. The trend here is for them to examine the quality of property portfolios more closely through increased financial due diligence activities in order to avoid the risk of loan defaults and to determine the necessary value adjustments.
These are just some of the exciting topics in Real Estate Bulletin 01/2024. Download the issue here now.
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