The future development of property markets in Europe, and in particular in Germany, should be seen as being closely linked to political, monetary, and overall economic conditions. On the political side the very difficult to predict policy of the new American president, in particular, is a cause for concern among investors and companies. On the monetary policy side the ECB is not yet expected to depart from its low interest rate policy. This indicates that European and in particular German mortgage rates are only likely to rise marginally.

Despite political uncertainties, interest in property investments is likely to again remain at a very high level in across Europe and especially in Germany in 2017 due to low interest rates pressuring investments, as well as solid economic data. Development in regional markets will continue to be influenced by cross-border investments thereby reflecting the role of foreign investors who were responsible for about half of all property investments made in many countries in recent years.

The great interest shown by foreign and domestic investors in German property remains founded on the ongoing economic upswing, the country’s image as a safer location for investments, and the attractiveness of the residential and commercial property markets. The top 7 cities will remain the preferred destinations for new investments while the very tight supply of good properties is likely to be mirrored in a slightly lower level of transactions. Experts are predicting that a volume of transactions within a range from € 60 billion to € 65 billion in 2017, with residential property portfolios accounting for € 10 to € 12 billion of this figure. Against this background it may be expected that returns will see a further slight decline associated with rising prices.

A stable rental market is one of the factors behind the strong interest in commercial property investments. Although market participants anticipate a slight decline in turnover of space in 2017, this change will, however, be solely due to a tight supply of marketable space. This is due to the likelihood that demand will remain high against the background of the good economy. New building activity will be at a similar level as in in 2016, although the pre-completion leasing rate will decline slightly. The combination of these individual factors will ease pressure on rents, which in turn will result in a slightly lower rate of growth on a year-over-year basis. As investor demand is expected to remain high, capital values of office properties should also rise slightly.

No signs are visible that the prevailing trend will change in the German residential property market in 2017 due to two reasons: first, capital investors and owner-occupiers will continue to strongly focus on residential property in view of very low interest rates and a slightly higher rate of inflation. Secondly, forecasts call for population growth in regions with strong and expanding economies at least until 2020, which in turn translates into unbroken high demand for housing.

Investments in housing will again increase notably in 2017. The Bundesbank anticipates growth of 3.7 percent. The number of building permits will also rise further. The Federal association of German housing and real estate enterprises (GdW) estimates that permits for about 400,000 housing units will be issued, a level that corresponds to the predicted number of units needed. This could slightly ease the pace of growth of housing prices and rents.

However, as prices continue rising in 2017 they will again be accompanied by discussions concerning possible formation of a property bubble in the German residential property market. Despite these worries, the risks of a bubble forming have not notably increased. This is particularly visible in the number of loans made and lending conditions. What has happened, however, is that the implementation of the Directive for residential property loans has actually placed greater demands on potential borrowers. At the same time, the faster rise of prices tends to be coupled with a danger of prices overheating in certain markets, making it necessary to continue closely monitoring this development.

Further developments in Great Britain will be influenced by the economic effects of Brexit, as its long-term impact on the property market still remains almost unpredictable. It is anticipated that the normalisation of the office property market will continue and the period of rising rents, especially in London, will be over for the time being. Furthermore, the future direction of prices in the residential property market is marked by uncertainty. It is expected that this will lead to growing hesitation among buyers and sellers. Forecasts for rents and purchase prices in numerous regions vary from no growth at all – for example in London – to even a slight contraction – for example in the North East.

The French residential and commercial property market is likely to continue the favourable development noted in the previous year into 2017 against the background of unbroken strong economic growth. This will generate additional momentum for the office properties market and be reflected by higher demand for office space. Vacancy rates for office space will decline further as that globally active investors will shift their activities from Great Britain to France. This in turn is likely to generate notably higher demand for property and thus a further decline in returns. The French housing market is also anticipated to develop favourably. A slight rise in new construction activity is facing good demand supported by low mortgage rates. Therefore, rents and prices will rise.

Interest shown by institutional investors in the Netherlands will remain at a very high level in view of the expected continuing favourable economic development. Strong demand will be focused on business centres where the greatest increases in prices are expected to occur. Rents will record another increase as demand will be met by a further tightening of available space.

Experts anticipate that development in the Swiss residential property market will not differ a great deal from 2016. Unchanging low interest rates will keep demand for residential property high as investors also view it as a safe capital investment. The pace of growth in purchase prices and rents will slow once again, although regional differences will remain intact. Thus, prices for condominiums and single-family houses are predicted to rise slightly in the German-speaking part of Switzerland, while the decline in prices seen in western Switzerland is expected to lose momentum.

Forecasts for the future development of the commercial and residential property markets in the USA are clouded by the unchanging difficulty of understanding the direction of the new president’s policies. However, no notable changes are expected for now in the office properties market, although in the interim a few American markets, especially Denver, San Francisco, Silicon Valley and Dallas, could have reached the end of a phase of rising rents. A slight decline is expected in the volume of investments, albeit from a still high level. Forecasts for the housing market tend to see it weakening with rents and purchase prices rising at a slower pace. At the same time, the completion of new housing units will reach its peak in 2017 thereby raising the risk of apartments remaining vacant, especially in the higher-priced segment of the market.