The real estate market – will it drag the global economy down?

One of the world’s largest real estate events – Expo Real in Munich – will take place soon. Experts from all over the world will meet there to discuss the current situation and the future of the market, which has been in serious trouble for many months. What is likely to dominate the experts discussions this year and what future awaits the real estate industry? – comments Szymon Mojzesowicz (MRICS ASA), real estate expert and participant in Munich Expo Real 2024.

Comment:

Unfortunately, the problems in this market are not diminishing, but are actually increasing. We are entering a dangerous phase, when the troubles of the real estate industry translate into the economic situation of countries. In the U.S., banks have slowly begun to hedge against a crisis similar to the one in 2008. In Germany, too, there is growing talk that real estate will drag down the financial sector.

With the correction in real estate markets comes the risk of financial instability, especially in regions where economic activity relies heavily on real estate. So, are we in for a repeat of 2008? I hope that local and global institutions have learned the right lesson from that time.

The commercial real estate market in Europe has been in crisis for many months, and there is no indication that this is going to change any time soon. The collapse in the value of transactions in the first half of 2024 reaches 60% with respect to the average of the last five years. Investors are becoming increasingly cautious. The shift from the aggressive investment strategies of five or eight years ago to more conservative ones will, and already is, leading to reduced capital inflows into the real estate sector.

Besides, there is a shortage of apartments on the European market. And those that are, end up exclusively in the hands of investors. Good ideas are needed on how to get out of this crisis.

Certainly, during Real Expo there will be discussions on how to calm this nervous situation. How to stimulate commercial real estate transactions and what forms of investment financing to choose soon. I think we will learn the strategies of global investors for the coming months, which will help shape local investment policies in this area. Expo Real is a good place to look for solutions. I hope that this is what will happen this year as well.

Szymon Mojzesowicz (MRICS ASA)