According to Rohrer Immobilien, Munich remains one of Germany’s most stable property markets this year. Sven Keussen, managing partner at Rohrer Immobilien, said: “Following the shift in interest rates and a period of uncertainty, the market is readjusting: transactions are on the rise, whilst buyers are being more selective in their calculations. Quality, location, ESG performance and resilient returns are having a greater influence on marketability and price.”
Of particular note is the adjustment to standard land values for building plots in certain segments. This is due to higher financing costs, high construction costs, longer planning times and more cautious cost estimates. The market is stabilising at a new level.
Residential property investment
The residential sector is characterised by a growing supply of existing properties, high demand for rental accommodation and low levels of new-build activity. Value-add properties are in particularly high demand: residential and commercial buildings in need of refurbishment, with energy-saving potential, scope for expansion or usage concepts that can be optimised. Investors are looking for portfolios where active management creates value.
Purchase prices in the residential sector have largely stabilised and are now levelling off, depending on location and quality. Properties of lower quality require price concessions; good locations, solid rental income and development potential remain in short supply. The conversion of commercial properties into residential ones is also gaining in importance, provided that planning permission, financial viability and technical feasibility are in place.
Commercial Investment
There is a clear divergence within the commercial property sector. Modern, flexible and ESG-compliant spaces in central or well-connected locations remain in demand. Older office portfolios, out-of-town locations and properties with no prospects for future use are under pressure. Interest rates are having a significant impact, as the cost of capital directly affects purchase price factors and yield requirements.
Opportunities arise where owners accept new price levels. For sellers, realistic pricing is crucial. Commercial properties must stand out on the basis of their location, creditworthiness and suitability for alternative uses, or offer a robust transformation story, for example through modernisation, mixed-use development or the potential for residential use.
Outlook
Keussen: “The following market outlook is emerging for this year and next. The residential sector remains strong, whilst value-add strategies and repurposing are gaining in importance. In the commercial sector, too, adjusted prices, more stable financing conditions and viable concepts are once again creating attractive entry opportunities.”
The Munich market offers good prospects overall for investors who take into account location quality, property condition, ESG requirements, financing and future use prospects. Quality prevails and is once again being rewarded more highly in a more stable environment.
