All signs point to optimism
With the year steadily drawing to a close, it is a good time to contemplate the current and future state of the property market. And above all, what does the latest survey of market sentiment tell us as we approach the end of 2024?
To gain a deeper understanding of market trends, SCHICK Immobilien regularly conducts an exclusive Residential Investment Barometer survey of 2,000 private and commercial property owners and investors. The most striking aspect of the latest Barometer is that it reveals a clear and positive shift in the market, with existing properties becoming increasingly appealing as a viable investment option for both private and commercial investors.
The surge in optimism compared to the previous survey in May of this year is quite remarkable: around 38 per cent of surveyed property professionals now describe the market as “good”, a significant increase from the 25 per cent reported in the previous survey. There was also an uptick in sentiment among the somewhat less brash experts, with the majority of respondents now rating the current market situation as “average” (46 per cent), marking an increase of more than 5 percentage points from the May 2024 survey. In total, more than 80 per cent of respondents rate the market situation as neutral to positive, signalling a positive outlook for the residential investment market and providing a clear indication of what lies ahead in 2025.
Most owners and investors are planning acquisitions in 2025
These trends are also reflected in price expectations. The percentage of respondents expecting prices to remain stable is almost unchanged at around 38 per cent (compared to 35 per cent in May 2024). At the same time, a significantly larger proportion of investors and owners expect prices to rise: 36 per cent predict price increases – a significant increase compared to the 23 per cent from the previous survey. In contrast, the percentage of respondents who expect purchase prices to fall is down to just under 23 per cent (May 2024: 31 per cent). These indicators point to activity and optimism in the market. Looking back a year, only about a third of the survey’s participants were expecting neutral or positive price growth, whereas now, more than three quarters of respondents hold such expectations.
These developments are further bolstered by the strong interest in property acquisitions – another finding of the SCHICK Immobilien Residential Investment Barometer that gives us reason to be optimistic about the upcoming year. Over 56 per cent of respondents are planning acquisitions within the next twelve months, while only about one in five are considering selling. Approximately a third of the survey’s participants are focused on expanding their existing property portfolios, a trend that has remained consistent since the May survey. Such stability in this regard shows, not least, that we are not dealing with a short-term, flash-in-the-pan development: 73 per cent of respondents say they are focused on holding their assets for the long-term. This underscores their confidence in the stability and value retention of real estate assets. In contrast, less than 25 per cent of respondents are planning energy-saving renovations, a factor that is likely to gain importance in light of increasingly stringent ESG (Environmental, Social, and Governance) requirements.
Reasons for concern: tightening of tenancy laws and ESG requirements
Given the current political uncertainty in Germany, in combination with overall economic developments, there are also a number of challenges that cloud the outlook for 2025. The primary concern for investors is the potential tightening of Germany’s tenancy laws, which is viewed as the most significant investment risk by 72 per cent of respondents, followed closely by ESG requirements, identified as a key challenge by 68 per cent. Other risks, however, play a lesser role, with further price declines, for example, expected by only 8 per cent of respondents, and concerns about rising interest rates and inflation also declining at 27 per cent.
Energy-efficiency refurbishment continues to be a source of uncertainty for investors throughout the real estate market. The percentage of respondents weighing up whether to dispose of their properties due to potential costs associated with energy-efficiency renovations has decreased from 14 to 11 per cent. However, only slightly less than a third of those surveyed are currently planning energy-efficiency refurbishments within the next three to five years, while nearly 58 per cent have decided to adopt a wait and see approach. This indicates that while the topic is on the minds of many investors, political instability is hindering long-term planning for property owners.
As the survey confirms, a majority of real estate professionals and investors are approaching the new year with confidence and are looking to grow their businesses in the upcoming year. Nevertheless, the fundamental need for planning security and stability remains a critical factor in determining whether 2025 will be a successful year for the real estate market or not.