German chancellor lines up fresh crisis talks with property titans

Demire Deutsche Mittelstand Real Estate AG

02/08/2024 07:00

By Tom Sims, John O'Donnell and Matthias Inverardi
       FRANKFURT, Aug 2 (Reuters) - German Chancellor Olaf
Scholz is launching a fresh bid to tackle a property crisis as
the country braces for recession and elections that could
bolster the far right. 
    The government has scheduled a meeting of politicians,
ministries and industry representatives in Hamburg on Dec. 6,
two top industry officials said.
    The meeting will address the housing shortage in Europe's
most populous country, one exacerbated by the failure of major
developers and a crash in investment and financing as real
estate prices slumped. 
    The last such gathering in September produced a raft of
government proposals but little concrete action.
    "It shows something is happening," Iris Schoeberl, president
of the German Property Federation representing 37,000 firms,
said of the renewed effort. 
    "It also sends a strong signal to the people that the
chancellor is tackling the issue." 
    Tim-Oliver Mueller, head of the German Construction Industry
Federation, lamented that "much of what was discussed previously
has come to nothing".
    "We need concrete steps and real action," he said.
    Germany's 730 billion euro property industry contributes a
fifth of the country's output, eclipsing its auto sector.
    Industry leaders have been pushing for changes including a
cut to Germany's property sales tax, which can be 6% of the
price of a home, and relaxing rules to make it cheaper to build.
    The government didn't respond to a request for comment. The
housing ministry said it was working to support the industry
with measures such as speeding up the building approvals
process.

    
    
    For years, low interest rates and a strong economy fuelled a
German property boom, which ended in 2022 when rampant inflation
forced the European Central Bank to swiftly raise borrowing
costs. 
    The ensuing funk resulted in a slowing of deals, stalled
projects and top developers going bust. Recent data still shows
an accelerating fall in building permits for apartments, and
another plummet in new building starts in the first half of the
year.
    While the ECB's June rate cut sparked hopes of a revival,
executives remain cautious.
    Rolf Buch, chief executive of one of the nation's biggest
landlords Vonovia, which reported another loss for the first
half of the year, predicts more property companies will go bust.
    
   
     Germany has failed to meet its goal of building 400,000
apartments a year as millions flock to the country to escape
wars and in search of work. 
    The far-right Alternative for Germany (AfD), which has
campaigned for policies to support housing, has a chance of
winning state elections later this year as the popularity of
Scholz's three-way coalition slips ahead of a 2025 federal vote.
    "The housing shortage can lead to populists increasingly
taking up the issue with supposedly simple answers," warned the
German Property Federation's Schoeberl.
    Scholz, who is regularly confronted about the lack of
affordable housing, told one gathering in Mainz earlier this
year: "We must find a way so that housing goes up where it is
sought and needed."
    
    
    After spending tens of billions to tackle the energy crisis
and boost defence spending, Germany has little left for the
property crisis, with Mueller also blaming fragmented
responsibility between the federal government and the 16 states
for hobbling a response.
    Felix Pakleppa, chief executive of the ZDB industry
association representing 35,000 building firms, said there
should be subsidies and fewer energy-related regulations.
    "We in Germany have become accustomed to the gold standard
for technical building specifications, which has made
construction projects ever more demanding and costly," he said.
    Since the September meeting, the drumbeat of bad news has
continued, with the collapse of Rene Benko's Signa real estate
empire, which had a major footprint in Germany, one of the more
notable failures.
    Some banks have also come under stress while a Frankfurt
skyscraper home to Germany's central bank and asset manager Deka
filed for insolvency. Apollo-owned Demire also said four
subsidiaries will file for insolvency after its bank refused to
renegotiate a loan.
    Schoeberl, meanwhile, is pushing for measures to allow
developers to build quickly, and for consistently low interest
loans from a government-backed bank. 
    "What real estate needs is trust and the ability to plan,"
she said.
    
    
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
German building slumps    https://reut.rs/4d7LDT8
New building slows    https://reut.rs/3zIaqiu
Home prices fall    https://reut.rs/3RCoRdL
Vonovia underperforms    https://reut.rs/3Yss58a
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Kirsten Donovan)
 ((Tom.Sims@thomsonreuters.com; +49 30 220 133 645;))