Text: Matthias Pink

First a crisis, then a boom

Hand on heart, if somebody had told you ten years ago that property prices in Germany would at least double over the coming decade, would you have believed them? On 15 September 2008, investment bank Lehman Brothers filed for insolvency, marking the nadir of the global financial crisis. The crisis would lay the foundations for a perhaps unparalleled real estate boom, not least in Germany. Over the last ten years, purchases of residential and commercial property by institutional investors have totalled half a trillion euros (€120bn for residential property and €380bn for commercial property). Such inflows of capital are unprecedented in the German real estate market. This surge in demand has driven prices to an extent that nobody would have truly expected. Capital values have doubled across practically all property sectors during this period, reaching new record levels across the board.

Indeed, the past decade has produced a number of records, initially on the negative side, before setting numerous positive benchmarks. In that respect, the last ten years will leave many entries in the history books. They have also given us plenty of tales to tell, such as Berlin’s promotion into the league of world-leading investment locations and the renaissance of residential property as an institutional asset class. Here, we recount both of these stories and map out how the narratives might continue. In a third story, we discuss how the German real estate market could unfold going forward and give our medium-term outlook. The story so far: there was a crash and then a boom and there are still no signs of a ‘bang’ on the horizon.