Geschäftsbericht 2015, englisch

45 management report Property and property financing markets Robust growth in Europe creates good general conditions to allow the overall favourable development of property markets to continue. And as there are currently no signs that mortgage rates will rise noticeably, property will also remain the focal point of investor interest in 2016. In view of Germany’s solid economic situation, the stable rental market and the unchanging favourable financing environment, it will retain its standing as one of the most attractive markets. Based on this, we anticipate that we will again see pronounced demand for residential and commercial properties. Available supply in the residential property market will again be insufficient in view of high demand, especially in the major metro- politan areas and university cities. This situation applies in the mar- kets for buying and renting residential property, with low-cost housing being particularly tight. The situation is not expected to ease as it is anticipated that the number of building permits issued in 2016 is more likely to grow at a modest pace. As a result, it is anticipated that the overall market for houses and apartments will see prices rise further, with prices in the major metropolitan areas rising at a faster pace. This means that professional investors will remain highly interested in residential property. However, in view of the limited offer, experts anticipate that the very high volume of housing portfolio trans- actions recorded in 2015 is not likely to be reached again. Furthermore, we also do not expect to see a nation-wide, bubble-like development in the residential property market in 2016. Despite this, the danger of exaggerated values still exists at a regional and local level – especially in major metropolitan areas – due to rising prices. The favourable development of the residential property market – coupled with low mortgage rates – will also lead to a further in- crease in the demand for property loans. Based on estimates pre- pared by the National Association of German Cooperative Banks (BVR), the total volume of housing loans will expand by 2.7 percent in 2016. This should also see a continuation of the above average growth trend among the banks within the Cooperative Financial Network, as their customers still value them for their close relation- ships and high levels of expertise. We also expect to see very strong demand again among domestic and foreign investors in the commercial property market. This will again be primarily focused on core properties located in the seven most important metropolitan areas. The very tight availability of properties and the heavy competition among potential buyers will also lift demand for properties in B locations. Accordingly, the gap between returns available at A and B locations will narrow substantially. Strong interest in commercial property investments will also be supported by the good rental situation. The big broker firms tend to expect that turnover of floor space will weaken slightly. The reason for this are anticipatory effects from the year 2015 and low vacancy rates. Although the volume of new properties com- pleted in 2016 will exceed the previous year’s figure, the amount of space available for rent will be relatively tight due to high rate of pre-letting deals. These market conditions mean that office rents will again rise slightly in 2016. Both peak and average rents will be affected by this development. In conjunction with a further moderate decline in return, the capital values of office properties should rise further during the current year. The favourable economic outlook has also added life to other Euro- pean property markets. Great Britain will continue to attract the greatest amount of investor interest, and especially the London office market, which is the most expensive location in Europe. The residential property market is expected to see a further reduction in supply – and especially in London – as it is not foreseeable when new building activities will pick up noticeably. Overall favourable developments are expected for France, albeit without a sweeping recovery as the office property market still has extensive vacancy rates. As a result, rents have only very lim- ited potential to increase. However, the favourable mid-term out- look does raise the attractiveness of property for institutional inves- tors so that a further increase in the volume of transactions may be expected.

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