By Tom Sims
FRANKFURT (Reuters) – A key indicator of the health of Germany’s property sector likely improved in 2024 and will make further gains next year, but will remain close to the weakest levels in more than a decade, underscoring the sector’s struggles, forecasts on Tuesday showed.
Global real estate firm Jones Lang LaSalle (JLL) predicted that property transactions in Germany would rise to 35 billion euros ($37 billion) in 2024 and increase further to between 40 billion and 42 billion euros in 2025.
The forecasts, if they pan out, would mean that 2023 was a low point in what has been a severe crisis in the industry in Europe’s largest economy. But they also reveal that any recovery will be slow.
“Despite the growth, the picture remains sobering,” JLL said.
Economic weakness has resulted in companies abandoning or postponing relocation and expansion plans, it said.
For years, property in Europe and particularly Germany boomed as interest rates fell, spurring demand. But a sudden jump in interest rates and building costs tipped some developers into insolvency as bank financing dried up and deals froze.
Germany has been hardest hit in Europe’s real estate-related rout that has also struck China and the United States.
Cuts in interest rates have since lent some support to the market.
Separate data on Tuesday pointed to ongoing weakness in the German economy, with business morale worsening more than expected in December, weighed down by companies’ pessimistic assessment of the coming months amid geopolitical uncertainty and an industrial slump.
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