Swan song or market shakeout

or: the categorical imperative in the property trading business model // fragments of thought

The EXPO Real 2023, investment fair for bankruptcies, bad luck and mishaps between politics, finance and world events

In many ways, 2023 didn’t really surprise us, but it probably overwhelmed us. Initially, after February 24, 2022, the “GERMANY business model” with cheap gas and a focus on foreign trade was reduced to absurdity. The energy crisis has turned the expensive “Made in Germany” location, which had exported world champions, into an overly expensive and no longer competitive location in global competition. The production of first-class products is no longer profitable. The political framework conditions are not right; The crisis cannot be fought solely with money; citizens’ money, also known as taxes, is finite, especially in times of inflation and cautious consumer behavior.

What follows – partly announced – is a seldom seen death of project developers. This business model, that of dealing with non-renewable land outside the real economy as a pure financial product with inflated balance sheets that no longer correspond to honorable commercial conduct according to the German Commercial Code (HGB), is also coming to a standstill. It saves those who can, behind their previously secured own money. A legal business model in which a development idea is laid over the ground, which is leveraged into dreamlike percentages only through the actions of the executive branch, which has been enforced by hordes of lawyers in order to maximize profits. Plus money that cost nothing – seemingly infinitely multiplyable with tricks and willing helpers in consulting, auditing and accounts outside Germany. Now money costs money again and many cannot pay their interest because overpriced projects on the balance sheets of the property companies, nested in holding companies, cannot be converted into liquidity. End of the story: Purchase by international financial investors and investors who leave the space until it is worth building again. Every day there is a new report about this in the media.

Federal states such as Saxony have counted on themselves to be rich in households 23/24 with ongoing real estate investments on the market. To this end, the householders have increased the real estate transfer tax again, but trade in real estate will not remain constant as expected, but will fall dramatically. Supplementary budgets are already required on a scale. After distributing money after money with a watering can, where will cuts be made or even social housing built? Property is obligatory according to Article 14 Paragraph 2 of the Basic Law and should serve the common good. The hoarding of land for speculative purposes (which was previously carried out as a business) is not such a purpose of obligation to the common good. This is how the federal government and every local municipality could act! This includes efficiency, competence, courage and a sense of responsibility. So much for both sides about the morality of the story or the reference to the categorical imperative.

We urgently need housing because demand far exceeds supply, especially outside of the very profitable luxury segment. Normal or even social housing could no longer be profitable given the purchase prices. The municipalities have even become competitors when it comes to funding instruments. Through statutory resolutions on development plans, the municipalities – certainly not all of them – have allowed themselves to be made willing helpers of the system. Because: the property owner has no right to initiate a development plan process, PERIOD

In addition, many people come to our country seeking refuge, so the social crises are home-made. Politics could act, but doesn’t. We want to ask: why?

The real estate and investment fair of the colorful group of investors and the cities and regions will be really exciting to visit this year. We will be reporting live from Munich with our cooperation partners from October 4th – stay tuned and online!