Dear Reader,

In the spirit of Expo Real 2018, our latest newsletter embraces both the political and economic developments within the industry. And there is a lot to report: Politicians are again actively intervening in the real estate industry, and you can see from our analysis how and why they are doing so. At the same time, the real estate industry is performing solidly, but not overconfidently; creatively, but without resorting to excessive speculation. Our economic review sheds light on how this balance is being achieved and how important financing institutions are in this context. After all, it’s only when you examine both sides of an issue that you can draw your own conclusions. The potential is great, as is the (home)work that still needs to be done.


Jürgen Michael Schick

Dr. Josef Girshovich


Dr. Josef Girshovich Associate Partner at PB3C GmbH

Russian roulette at EXPO REAL?

Immediately after EXPO REAL, share prices around the world took a massive tumble. Is there a correlation? And what if stock markets in Frankfurt and New York had started their slide during the real estate industry’s largest trade fair at Munich’s Exhibition Grounds? We’ll never know. But what we do know is that this year’s EXPO attracted more visitors and exhibitors than ever before. A total of 2,095 companies, cities and regions had stands – almost a hundred more exhibitors than last year. In addition, the number of visitors was up by 6.6 percent to almost 45,000. This is a record figure, but whether it will also be a record year for the real estate industry as a whole is far from certain.

There’s a world of difference between talking the talk and walking the walk. Some participants in Munich were clearly here to flex their muscles. Their stands are getting bigger and, if they need even more space, they simply build upwards (mirroring their ever-taller real estate developments). Their budgets for drinks, hors d’oeuvres and other give-aways have also reached hitherto unknown heights. In contrast, the eager beavers are engaged in short and productive conversations, sitting in small circles and discussing projects. What’s not clear is: Are these just exploratory talks or actual deals? Is this speed dating or the start of a long-term relationship?

The growing numbers of “newcomers” is striking. Word seems to have spread that the German real estate industry is doing well, that the market is solid despite some warnings, and that prices remain affordable by international standards (with the exception of Munich). It is obvious that the newcomers include a few one-day wonders and fortune-hunters. Of course, Don Quixote wouldn’t have got far if he hadn’t believed in his fantastical world.

Despite any economic flights of fancy, it is important to emphasize just how careful and prudent real estate lenders have become. Unlike eleven years ago, when the financial crisis had already reached the point of no return, institutional lenders are currently being extremely cautious. If anything, they are behaving even more cautiously than in previous years, accepting fewer deals and prioritising quality over quantity. Hardly any loans are being approved without significant equity capital and no forward deals are being green-lit without conservative due diligence. Above all, this more prudent climate rewards developers and real estate companies that, firstly, have analysed the market and its potential early on, whether in-house or with a reliable partner, and, secondly, have the necessary equity at their disposal thanks to their successful track records.


Jürgen Michael Schick Managing Director of MICHAEL SCHICK IMMOBILIEN GmbH & Co. KG
President of the IVD real estate association

Real estate industry in fear of regulatory frenzy

EXPO REAL 2018 was rated a complete success by so many participants. Once again, this leading international real estate trade fair racked up a string of new records (visitor and exhibitor numbers were both up), and a vast majority of attendees returned to their offices brimming with optimism. And yet, somehow, this year’s EXPO was different. There was one topic that dominated conversation and caused so much concern: politics. At no previous EXPO has so much attention and discussion been devoted to politicians and their plans. Of all the brokers and investors at the trade fair, there was not one who did not raise the issue of political interference, especially in the housing market.

There are three major topics that are currently causing headaches across the industry:
1. Over-regulation in tenancy law
2. The shortcomings of policies designed to boost housing construction
3. The impact of the single-agency principle on property markets

The German government’s plans to tighten federal rent control legislation (known in Germany as the Mietpreisbremse, literally rental price brake), rather than re-evaluating it as originally agreed in the coalition agreement, is one of the real estate industry’s major concerns right now. Above all, the government’s plan to manipulate official rent indexes by extending the reference period for rental data from four to six years, was met with consternation by many EXPO REAL attendees.

What’s more, there was little to no relief for project developers. The government’s accelerated tax depreciation schedule, which is time limited and restricted to smaller properties with construction costs of up to EUR 3,000/sqm, is nowhere near ambitious enough to deliver the support developers were looking for. Many of this year’s EXPO REAL visitors made it clear that only the long overdue increase in linear depreciation to 3 percent would do the job. There was a reaction of disbelief to the news that, as a result of Angela Merkel’s Housing Summit, there are going to be even more neighbourhood protection areas, thus expanding the scope of municipal authorities’ pre-emptive purchase rights.

New legislation to force property owners to pay brokers’ commissions, which the centre-left SPD has hailed as extending the single-agency principle to property purchases, attracted fierce criticism, and not only from brokers and transaction advisors. The new law proves that there is no end to the government’s regulatory frenzy, which now extends to areas where there is no discernible need for new statutory regulations. In 75 percent of Germany’s administrative districts, sellers and buyers already pay an equal share of brokers’ commissions – a situation that can hardly be described as unfair. In fact, this was a point that almost everybody at EXPO REAL was in absolute agreement on.

In my own company, an investment brokerage, we have only ever acted on behalf of a single party in any transaction. We believe this allows us to avoid unnecessary conflicts of interest. Nevertheless, I would like to be free to decide whether we represent a property’s seller or its buyer. This is something our clients should always be left to decide for themselves. What we don’t need is a legislator hoping to score political points from populist, headline-grabbing ideas.

Like never before, EXPO REAL 2018 was dominated by politicians and government policy. As a result, eyebrows were only briefly raised when Germany’s Construction Minister, Horst Seehofer, cancelled his visit at the last minute.
Nebensache, dass Bauminister Horst Seehofer in letzter Minute seine Teilnahme abgesagt hat.