MIPIM 2023 Digital Edition

Investing in Austria
Does it take longer to complete deals in
market phases like the current one?
Transactions are definitely taking longer at
the moment. And the more time that passes,
the more can happen. This also increases the
risk of another interest rate adjustment or something
else happening. In other words, if it
usually takes two to three months on average
to complete a deal, it‘s currently perhaps four
to six. Financing in particular takes longer.
And when you are close to the finish line
at the end of the day and find out that the
financing has fallen through, that is of course,
highly annoying to all parties involved.
Is it true that some sellers only start
negotiating with secured financing?
In the current situation, securing financing
is particularly important for the seller, as it is
not uncommon for financing requested by the
buyer to end up not being approved or not approved
as planned. As a seller, you understandably
want to make sure that your counterpart,
to whom you are also granting exclusivity and
thus rejecting other investors, can also handle
the deal financially at the end of the day and
that you are not entering negotiations in vain.
At the moment, there is optimism in the
industry that something is moving with
the KIM regulation, regarding the ban on
interim financing. Do you see it that way
as well?
I think it‘s obvious that something has to
change here. If it is no longer possible for
people to acquire property, or if the KIM
Regulation creates such major obstacles,
then that is not a healthy development.
Particularly when you talk about interim
financing, this is really incomprehensible: If,
for example, you have already built up real
estate assets or an extensive stock portfolio
and thus clearly have a credit rating that can
be financed, the KIM Regulation prevents financing
from taking place if you do not have
an additional 20% equity capital, a paradoxical
situation. Although banks are allowed to
finance such borrowers to a certain extent,
this quota is exhausted relatively quickly.
What would be the impact on the market
of lifting the ban on interim financing?
First and foremost, something that was
created by regulation and hinders the market
would be abolished. However, it remains to
be seen whether the market would then be
noticeably boosted because the increased
interest rates are not exactly conducive to
transaction activity either.
Should the legislature not consider how
to help people to raise the 20 percent
equity? If one asks around, one gets the
distinct impression that above all younger
people cannot afford a loan.
To begin with, it is difficult for many people
to raise even 20 percent of their own capital.
But that‘s not the main reason why you can‘t
get a loan. In many cases, there are still
moms, dads, grandmas and grandpas who
can help out if you can’t raise this 20 percent
on your own. A bigger hurdle is the debt
service ratio of 40 percent, which may not
be exceeded. This often hinders the process
even more.
Various sources currently tell us that the
cycle of interest rate hikes should come
to an end in the first half of the year. Is
that realistic, or will the interest rates stay
higher for much longer?
I assume that we will see a few more interest
rate hikes this year, as announced. The next
one in March. Over the course of the year, we
will see at least one more interest rate step,
so we can assume that interest rates will not
only move up insignificantly but noticeably.
With what consequences?
As you know, the capital market has a
significant impact on the real estate industry,
especially in the institutional sector. And
when interest rates are higher, alternatives to
real estate investments also become attractive.
When I look at German government
bonds, for which you currently get around
2.6 percent, or bonds from the USA, which
even offer up to four percent. Not to mention
good corporate bonds. That sends clear
signals to large investors and financial intermediaries
with broad investment spectrum.
At present, they often prefer to look at more
liquid asset classes, some of which offer
higher returns than real estate. While real
„Raising even 20 percent equity
is difficult for many. But that‘s
not the decisive issue why some
people can‘t get a loan.“
Markus Mendel,
EHL Investment Consulting
estate investments will never go out of style,
they will have to offer different yields to be
competitive. After all, one must remember:
It‘s not just the brick I buy that counts, but
also how much interest I have to pay to afford
the brick or finance it.
Because you are talking about other
yields, do you see that the situation is
slowly normalizing in asset classes such
as logistics, where yields approached
those of residential properties in the wake
of the Corona crisis?
Of course, logistics properties are also in demand
again at significantly different prices.
Many investors are not only active in Austria
but also on a European level or at least in
16 ImmoFokus