Germany’s recovery unlikely before 2026: Ulrich Höller

German investors are likely to need at least another two years to deal with their individual situations before they re-enter the market, making a recovery unlikely before 2026 and 2027 according to Ulrich Höller, managing partner of Munich-headquartered ABG Real Estate.

Höller, who was speaking at a recent press event at ABG’s Central Parx development in Frankfurt (pictured below), said that processing insolvencies, which could increase due to prolonged market inactivity, will also take a similar amount of time because of the large number of stakeholders involved.

“The market will be dominated by international investors and family offices over the next few years, although the high yield expectations of many investors are unlikely to be met and will be adjusted,” he said.

However, Höller – who is also the former chairman and CEO of DIC Asset, now known as Branicks – said that experience of similar market phases shows that real estate prices will not fall to “dumping level” again and Germany will not collapse economically.

“From mid-2025, market activities are likely to pick up, premium properties will become even more attractive and, as a result, rents will also rise.

“Office tenants are primarily looking for top space in prime locations and are paying top prices, while vacancies in older existing properties are increasing. The first players will start to invest and then others will follow.

The high level of interest rates is not the only problem for the market, Höller contends. “The high ratio of state-related costs of 37.1% (state ratio) when purchasing properties from project developers is putting a heavy burden on the real estate market,” he said.

Residential construction is lagging the need for new apartments which is 520,000 this year and will be up to 700,000 units in 2025. More apartments were built in the 1990s because approvals were granted more quickly and efficiently.

Approval procedures need to be accelerated because bureaucracy and the massive political framework conditions delay projects considerably, Höller said: “Development planning procedures take an average of seven years. This also leads to investments being located abroad.”