Current Report on the International Investment Real Estate Industry - June 2023

By E1 Holding

The investment real estate industry is facing new challenges and changes driven by the current economic situation and the real estate market. E1 Holding has closely monitored these developments and would like to provide you with an up-to-date insight into the industry:

Sales pressure and difficulties in refinancing

More and more owners of investment properties are forced to sell their properties. This particularly affects owners of larger investment properties who are experiencing difficulties in refinancing. The demand for these properties has declined, and many owners are compelled to adjust their prices to attract buyers.

Purchase offers below 50% of the listing prices

Investors are responding to the challenging market situation by submitting purchase offers below 50% of the listing prices. They justify their low offers with market uncertainties and potential risks to future returns. Nevertheless, property owners remain relatively calm and hold onto their properties for the time being.

Increase in foreign investors in Germany

Despite the market challenges, Germany continues to attract foreign investors who are seeking attractive existing properties and investment opportunities. Germany is considered a stable and reliable investment location that offers opportunities even in times of economic uncertainty. The increase in foreign investors can lead to new impetus in the market.

Changes for real estate agents and developers

The current market conditions require real estate agents and developers to rethink their strategies and become more proactive. The number of real estate transactions is significantly decreasing, but larger companies are using the crisis as an opportunity to make attractive investments. Investors with sufficient equity can complete larger deals without external financing, giving them a competitive advantage.

Real estate agents need to explore new avenues

To be successful in this challenging market, real estate agents must explore new avenues. Many agents are moving away from the consumer market and instead focusing on collaborating with investors and professional clients. Additionally, they are expanding their scope of operations to work nationally or internationally. Flexibility and a broader network are crucial in finding attractive investments.

Investors expand their network to real estate agents

Investors recognize the importance of establishing strong relationships with real estate agents to gain early access to attractive investments before they hit the public market. Real estate agents are in high demand during the current crisis as they have direct connections to owners who are compelled to sell. This presents investors with opportunities to find and purchase discounted properties during the downturn.

The investment real estate industry is undergoing significant changes and challenges, but it also presents opportunities for savvy investors. The market is adapting to current conditions, and real estate agents play a crucial role in facilitating transactions between owners and investors.

High demand for land for photovoltaic and solar installations

In an era of heightened environmental awareness and the expansion of renewable energy, land for the establishment of photovoltaic and solar installations is particularly sought after. Investors recognize the tremendous potential of these sustainable energy sources and actively seek suitable land for their projects. By harnessing solar energy, they can not only contribute to reducing CO2 emissions but also generate long-term income through the sale of generated electricity.

The increasing demand for land for photovoltaic and solar installations reflects the trend toward environmentally friendly investments. This development not only offers opportunities for investors but also has positive implications for the overall real estate market. Landowners can leverage their plots for renewable energy expansion, thereby adding additional value to their properties.

Highly sought-after investments in the investment real estate industry:

Investors are showing increased interest in various types of properties that offer attractive return prospects. Some of the highly sought-after investments include:

Short-term rental residential properties Due to the growing tourism sector and the increasing popularity of platforms like Airbnb, residential properties for short-term rentals are in demand.

Residential complexes and multi-family houses for individual unit sales Investors see potential in privatizing residential complexes and multi-family houses by selling individual units.

Healthcare properties Medical centers and senior care facilities are experiencing growing demand as the healthcare industry continues to expand and promises attractive returns.

Convenience stores and specialty retail centers Commercial properties used as convenience stores or specialty retail centers provide stable income and, therefore, are sought after by investors.

Land with approved residential development Especially in prime locations, land with pre-approved residential development is highly sought after as it expedites the development process and offers attractive investment opportunities.

Commercial properties with development potential Investors are searching for commercial properties with high development potential, such as industrial facilities or office buildings in emerging business centers.

Hotel properties in city centers Business hotels in central locations are considered an interesting asset class by investors, as they benefit from the growing demand for business travel and tourism.

Investors are increasingly seeking share deals to secure existing loans at favorable conditions while also saving on real estate transfer tax and other ancillary purchase costs.

After the COVID-19 pandemic and the rise in interest rates, summer is bringing new life to the real estate market. Investors remain optimistic and continue to see stable demand in the market. Interest rates are expected to remain at their current level or even increase for a while, but the demand for real estate investments remains steady.

The crisis has demonstrated that real estate investments can be a secure asset class even in turbulent times. The real estate industry has proven its resilience and offers investors long-term stability and attractive return opportunities.

Investor interest in high-yield investment properties:

  • Foreign investors are increasingly focusing on investment properties with low administrative effort.
  • Hotel properties with financially strong tenants, healthcare properties such as senior care homes, and specialty retail centers are in high demand.
  • Key purchasing criteria include financially strong tenants, long-term lease agreements, and sustainable, easily rentable locations.

Opportunities for small investors and mezzanine capital providers:

  • Small investors and mezzanine capital providers are in high demand in the current market situation.
  • Investors with equity capital support distressed property owners or participate as capital providers in development projects.
  • Equity participations offer high risk with secure interest rates and mortgage-backed security, providing investors with flexibility.
  • Equity participations are currently in high demand like never before.

The importance of personal relationships in the real estate industry:

  • Real estate agents must focus on building personal relationships with investors.
  • Continuous contact and support until the successful placement of the next investment are crucial.
  • Agents who provide excellent service to their investors successfully close deals.

Digitalization and new platforms in the real estate market:

  • New platforms facilitate real estate transactions and offer investors more targeted opportunities.
  • Agents benefit from more efficient processes through digitalization.
  • Property owners can find suitable buyers more quickly, provided the price is right.

Interest rates and prices in the investment real estate industry:

  • Interest rates are expected to remain at their current level or even increase.
  • Prices continue to decline but also present opportunities for buyers.
  • Property owners should take early measures to successfully complete sales with pending financing.

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