The problem: The real estate market is already under considerable pressure since interest rates and construction costs are rising while property prices are falling. For project developers, building is often hardly worthwhile due to the lack of returns, and for real estate companies that own the buildings, the financing costs tend to become more expensive, while at the same time the need for depreciation on the balance sheets increases. The result: Lenders become restless and sometimes demand additional collateral, which creates additional liquidity needs.
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What is particularly troubling the markets is uncertainty, says Christian Alpers, real estate expert at the Falkensteg management consultancy. “Are interest rates going to continue to rise, or are things going down now? And if so, how far?” Without answers to these questions, no one can calculate how the costs will develop and whether a project will ultimately be worthwhile. “That inhibits investment,” says Alpers. Especially since many who have money would prefer to wait and say to themselves: “The big thunder is still to come.”