German Landlords Expect Home Prices to Deteriorate Further in 2024

German real estate company TAG Immobilen, with approximately 86,000 residential units in its German portfolio and another 2,300 new apartments in Poland, told Reuters (2-7-24) that it anticipates home prices in Germany could fall as much as 30% below their 2022 peak. Reuters says TAG Immobilen’s assessment is more pessimistic than the company’s rivals but highlights the continued threat posed to Europe’s biggest economy.

In an interview with Reuters, TAG co-CEO Martin Thiel painted a bleak picture for Europe’s biggest residential property market, which has already seen prices tumble by around 10% in Germany’s worst property crash in a generation.

“We expect further losses in value,” Thiel said, adding that while he expected the fall in valuations to bottom out at 20%, TAG was taking precautions for worse. “You have to be prepared in case it is not the 20% but 25% or 30%. The balance sheet must be able to withstand that. You simply need that cushion. The market for transactions is incredibly difficult. You hardly see any big transactions.”

Thiel’s views are noticeably more downbeat that those of Germany’s largest listed property group Vonovia, whose CEO Rolf Buch told Reuters he was cautiously optimistic that the worst was over. Vonovia wrote down the value of its property by roughly 10% to June, plunging the group to a 4-billion-euro loss.

“I cannot guarantee that we will not see valuations that are a little bit lower in the next half year,” said Buch, whose company owns roughly 550,000 apartments. “But it seems that the market is reaching the bottom.”

LEG Immobilien, Germany’s second-largest listed landlord, had written down the value of its 166,000 apartments by more than 10% by the middle of last year and signaled further write-downs of up to 6%. LEG CEO Lars von Lackum told Reuters he did not expect a 30% drop. “The German property market is not going to implode.”