Real Estate Crisis Hits Europe as Interest Rates Rise
For a decade, low interest rates fueled a real estate boom in Europe’s largest investment property market. However, rising interest rates and increased construction material costs have led to the most significant real estate crisis in recent decades, resulting in several developers entering insolvency.
The value of commercial real estate, which has been declining for two years, saw a slight increase of 0.4% during the second quarter of 2024 compared to the first quarter of 2024, suggesting that the market is “calming down.” Nevertheless, the Association anticipates that prices will decline in the upcoming quarters due to weak economic performance and low transaction volumes in the sector.
“The situation in the commercial real estate market remains tense,” stated Jens Tolckmitt, the CEO of VDP.
Germany has been the most affected European country by the turmoil in the real estate market, which has also impacted China and the United States.
In recent weeks, Vonovia and LEG Immobilien, two of Germany’s largest real estate groups, reported losses following a reevaluation of their holdings. Last month, Deutsche Bank, the largest creditor in Germany, warned that the real estate sector remains under pressure.
