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Frankfurt’s housing prices rise despite the pandemic

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After being awarded a generous promotion, 52-year-old finance professor Claus Rerup is looking to buy his first home in Frankfurt. Finding a place in Holzhausenviertel, an attractive inner-city neighbourhood where he currently rents a two-bedroom, 100 sq m apartment for €2,400 a month, is proving difficult though.

“Housing is really becoming a problem in Frankfurt,” he says. “It may not be London prices but it’s not uncommon for a place to go for €10,000 a sq m.”

Low interest rates and a high level of pent-up demand from renters waiting years to buy a place they can afford have meant that prices for flats have kept rising in the past year, despite the pandemic’s hit to the economy and people’s livelihoods.

In the third quarter of 2020 prices for new apartments averaged €7,200 per sq m, up 8 per cent from the same quarter of 2019, according to Bulwiengesa, a real estate consultancy. Since 2014, prices for all apartments have been growing at about 10 per cent per year, according to the property company JLL.

Such has been the pace of recent growth that, last year, UBS ranked Frankfurt as having the second-most overvalued housing market of any major city in the world, behind fellow German city Munich, according to its Global Real Estate Bubble Index.

Prices for apartments in the centre of the city have continued to rise throughout the pandemic, helped by low interest rates and pent-up demand
Prices for apartments in the centre of the city have continued to rise throughout the pandemic, helped by low interest rates and pent-up demand © Evelyn Dragan
© Evelyn Dragan

As one of Europe’s biggest financial centres, Frankfurt attracts foreign workers and high-earning employees. Developers have also taken advantage of economic growth to invest in the upper segment of the market, contributing to house price inflation, UBS says.

But a correction phase will likely emerge when state subsidies linked to Covid-19 are withdrawn and pressure on income increases from recession.

In recent years, a lot of investment has come from overseas, says Sebastian Grimm, an analyst and valuation director at JLL. Low interest rates and the idea that Germany’s residential sector would bring in reliable yields throughout the pandemic have been a bigger factor than Brexit, he adds.

Map of Frankfurt

After the UK voted to leave the EU in 2016, some in Frankfurt predicted the city would become Europe’s next finance capital after London. Frankfurt Main Finance, the city’s lobby group, predicted that 10,000 jobs would relocate there over a period of eight years.

More recently, local bank Helaba estimated that 3,500 finance jobs will have been created in Frankfurt by the end of 2021, with the Bundesbank calculating that non-German banks could move €675bn to the country this year.

But the pandemic could be a setback. In Frankfurt, a report by Helaba in October found that coronavirus could cost 2,000 banker jobs by the end of 2022 — about 3 per cent of the total.

So far, Germany has weathered the coronavirus crisis better than many of its neighbours, with about two-thirds of the UK’s cases and a little more than half the deaths. But rising infection rates in recent weeks have led to the imposition of tighter lockdown restrictions, which could have a knock-on effect on the city’s property market, says Grimm.

“There’s been less migration this year and the private sector could be hit harder with this second lockdown,” he says. Grimm says prices could increase at a slightly lower rate as a result.

As one of Europe’s biggest financial centres, Frankfurt attracts foreign workers and high-earning employees
As one of Europe’s biggest financial centres, Frankfurt attracts foreign workers and high-earning employees © AFP via Getty Images

Many Frankfurt residents struggle to afford the city’s high property costs as it is. “A lot of people have difficulty finding a place to rent, people end up couch surfing for a month or so,” says British-born entrepreneur Amjed Younis, who moved from Lancashire to Frankfurt two years ago. “And, when they find something, there is already a queue of 20 people [at the viewing],” he adds.

“People with money can buy in the centre and believe the price will double in 10 years’ time,” says Andreas Reinhardt from the agency Reinhardt Immobilien, “For families who don’t work in finance, it’s completely unaffordable.”

A one-bedroom apartment, €969,000 through Engel & Völkers
A one-bedroom apartment, €969,000 through Engel & Völkers

The demand for high-end homes is strong, he says. Apartments in the spacious Holzhausenviertel or attractive Westend sell for €10,000-€15,000 per sq m, he adds.

The rise in remote working has led people to look for more spacious housing in the suburbs, says Florian Wenner, an analyst with Bulwiengesa. The wooded areas of the Taunus have become popular among day trippers — and homebuyers. But most still choose to live relatively central, says Wenner, as they enjoy the bustling city.

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Younis is among them, having recently swapped his one-bedroom flat near the European Central Bank — which cost him €1,500 a month — to a 45 sq m apartment in the Bornheim neighbourhood for €850 a month.

One of the most popular districts in the city, Bornheim has a farmers’ market and a variety of bars. Other popular areas include Sachsenhausen, along the Main river, famous for its apple-wine pubs and historic timber-framed houses, and Holzhausenviertel, where Rerup is looking, home to green spaces such as Adolph von Holzhausen park.

“People really enjoy the parks,” says Rerup. “A lot of people are working from home, but I don’t have a sense that the city is being emptied out.”

Buying guide

  • Transaction fees vary between 13 and 20 per cent of the purchase price, including a 2 per cent notary fee and a 6 per cent property transfer tax. Estate agent fees (which range from 3.5 to 8 per cent) are split between seller and buyer.

What you can buy for . . . 

  • €745,000 A 126 sq m flat in the attractive Westend area

  • €1.9m An exclusive penthouse of 244 sq m in the charming diplomats’ quarter

Follow @FTProperty on Twitter or @ft_houseandhome on Instagram to find out about our latest stories first. Listen to our podcast, Culture Call, where FT editors and special guests discuss life and art in the time of coronavirus. Subscribe on Apple, Spotify, or wherever you listen.





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Europe

German accounting watchdog chief to step down in wake of Wirecard

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The head of Germany’s accounting watchdog is to step down following mounting political pressure over corporate governance shortcomings exposed by the Wirecard fraud.

Edgar Ernst, the president of the Financial Reporting Enforcement Panel (FREP), said on Wednesday he would depart by the end of this year. He is the third head of a regulatory body to lose his job in the wake of one of Germany’s biggest postwar accounting scandals.

The collapse of Wirecard, which last summer filed for insolvency after uncovering a €1.9bn cash hole, triggered an earthquake in Germany’s financial and political establishment.

Felix Hufeld, president of BaFin, the financial regulatory authority, and his deputy Elisabeth Roegele were pushed out by the German government in January for failing to act on early red flags suggesting misconduct at Wirecard. Ralf Bose, the head of Germany’s auditors supervisor Apas, was fired after disclosing he traded Wirecard shares while this authority was investigating the company’s auditor, EY. The German government is also working to revamp the country’s accounting supervision and financial oversight.

Meanwhile, criminal prosecutors in Frankfurt are evaluating a potential criminal investigation into BaFin’s inner workings and on Wednesday asked the market authority to hand over comprehensive documents, the prosecutors office told the FT, confirming an earlier report by Handelsblatt. The potential scope of any investigation as well as the individuals who might be targeted is still unclear. BaFin declined to comment.

Ernst came under pressure as the parliamentary inquiry commission uncovered that he joined the supervisory board of German wholesaler Metro AG in an apparent violation of internal governance rules, which from 2016 banned FREP staff from taking on new supervisory board roles.

Last week, the former chief financial officer of Deutsche Post filed a legal opinion to parliament defending his move. He argued that his employment contract was older than the 2016 ban on board seats and hence trumped the tightened governance regulations.

The German government had subsequently threatened to ditch the private-sector body which currently has quasi-official powers.

In a statement published on Wednesday evening, FREP said that Ernst wants to open the door for a “fresh start” that would be untainted by the discussions around his supervisory board mandates. “FREP is losing a well-versed expert in capital markets,” the body said.



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Putin and Lukashenko’s ski fun shows cold shoulder to EU

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As news of new EU sanctions against Russia began to leak out of a meeting of bloc foreign ministers on Monday afternoon, Vladimir Putin and his Belarusian counterpart Alexander Lukashenko were discussing a different challenge to the Russian president.

“You can try to compete with Vladimir Vladimirovich,” Lukashenko, in ski gear, said to his son, Nikolai. “But you probably won’t catch up,” he added, with a smile to Putin as the Russian leader pushed off down the slope.

Putin and Lukashenko are the men behind Europe’s two repressive crackdowns over the past six months, who have both jailed or exiled their most prominent opponents and seen their security forces violently assault and detain thousands of peaceful protesters.

But in a summit in the snow-covered mountains of Sochi, on Russia’s southern coast, they revelled in their twosome of leaders shunned and sanctioned by Brussels, in a calibrated message to the EU that the cold-shoulder was mutual.

For foreign policy experts there were few details to digest, despite the complex negotiations going on behind the scenes as the two post-Soviet states seek to recalibrate their future relationship.

Putin is keen to deepen integration on Moscow’s terms. Lukashenko is desperate for Russian investment and trade co-operation but is loath to relinquish sovereignty. Yet in place of diplomatic negotiations and policy pronouncements, photographs and video footage of the two leaders enjoying each other’s company were in full display.

At the outset, Putin, in jeans and an open-collar shirt and blazer, greeted his guest with a handshake and a hug. “Even our appearance, clothes and so on, suggest that these are serious negotiations in ordinary clothes,” Lukashenko quipped. “It suggests that we are close people.”

Pleasantries exchanged, it was time for the salopettes and ski boots, and a shared chairlift to the summit. Putin, pushing off confidently, set off down the gentle slope, Lukashenko in his wake.

After a short ride on snowmobiles back to their chalets, discussions continued over more than six hours — and what appeared to be three different sized wine glasses.

“The optics for the international audience is that they have been able to maintain their positions and nothing can be done against them,” said Maryia Rohava, a research fellow at Oslo university specialising in post-Soviet relations.

“Now we’re talking not just about sanctions against Belarus but also against Russia,” she added. “And it seems like they look at that like, ‘Well, we don’t care . . . We’re just enjoying our winter break like autocrats do.’”

To be sure, the fun on the slopes was not wholly without power games. Putin was clear to underscore he was the senior partner, from wrongfooting his guest at the top of the ski lift to releasing photographs of their meeting showing Lukashenko scribbling notes as his host spoke.

But the mood music was in sharp contrast to Lukashenko’s last visit to Russia in September. Then, with protests raging and the Belarusian leader’s position looking shaky, Putin reprimanded his guest for mishandling the unrest and risking the toppling of an ageing post-Soviet regime that could weaken his own.

Then, in a businesslike and cold atmosphere, Lukashenko pleaded with Putin that “a friend is in trouble” and was granted a $1.5bn loan from Moscow — but not before his host remarked that Belarusian people should be given a chance to “sort this situation out”.

The absence of such language on Monday also sent a subtle signal to other illiberal regimes, particularly those on the outer rim of Europe who, like Belarus in the past, find themselves lured towards Brussels by economic opportunities but repelled by the reforms and democratic standards demanded in exchange.

The message to the likes of Georgia, Moldova, Armenia and Turkey is that Putin, whose relations with the EU are at rock bottom, is always ready to talk.



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Mitsubishi Motors set to reverse move to withdraw from Europe

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Mitsubishi Motors is set to reverse its decision to withdraw from Europe and build cars in France after months of pressure from Renault and Nissan, in a sign of fresh rifts within the alliance.

Mitsubishi will formally consider the move at a board meeting on Thursday, according to three people with direct knowledge of the matter, following months of fractious discussions with its alliance partners.

A framework agreement between the three carmakers was reached on Monday during an alliance meeting, two of the people said. They added that the deal may still fall apart.

The decision to have Renault produce Mitsubishi cars at its French factories in a manufacturing deal, if finalised, would force the Japanese company to justify the U-turn — and face down accusations it yielded to a Renault campaign to protect French jobs.

The coalition between the three car groups is held together by Renault’s 43 per cent stake in Nissan, which owns 34 per cent of Mitsubishi, the smallest of the companies.

The French government’s 15 per cent stake in Renault has fed longstanding fears at the two Japanese carmakers that alliance strategy would be heavily influenced by French industrial politics.

In July Mitsubishi announced plans to in effect pull out of its lossmaking operations in Europe by cancelling model launches and running down its current line-up. This would lead to the end of all car sales in European markets as early as this year.

Following the announcement, some dealerships have already sold operations in preparation for Mitsubishi’s exit, while others are preparing to become repair garages for the brand instead.

An agreement to build Mitsubishi cars in France would be held up internally as a sign the Renault-Nissan-Mitsubishi Alliance was working under new management teams installed after the arrest and ousting of former boss Carlos Ghosn in 2018.

But people within both Mitsubishi and Nissan have expressed concern about such a deal that would mean Renault building Mitsubishi cars — increasing work for its French plants and providing a political boost in the country, where it is cutting jobs. 

Executives were particularly worried about a potential repetition of Renault’s 2001 decision to move the Nissan Micra from the Japanese group’s Sunderland plant to its own underperforming Flins factory outside Paris. This was seen as a political move by the French group to shore up union support.

Mitsubishi said there was no change in its policy to halt development of new models in Europe.

Nissan and Renault said they would not comment “on speculation”. Renault added the alliance always “aims to enhance competitiveness and enable more effective resource-sharing for the benefit of all three companies” and that there “are always ongoing discussions between the three companies”.

Last month, Renault chief executive Luca de Meo suggested in an interview with the Financial Times that a deal could be done, saying: “We have space in our plants; we have platforms.”

De Meo also suggested that Renault could end up building more cars for Nissan in its French plants, something that was resisted by Nissan, according to people familiar with the discussions. That led to pressure being applied to Mitsubishi by both sides of the alliance, the people said.

Before last year announcing its withdrawal, Mitsubishi sold just 120,000 cars in Europe in 2019, giving it less than 1 per cent market share.

The tentative agreement reached on Monday is the first big deal between de Meo, who joined Renault as CEO last summer, and the heads of Nissan and Mitsubishi, and a test of the relationship between the three sides.

Nissan and Renault are focusing on turning round their own businesses as well as repairing the alliance, which came near collapse in the wake of the turmoil that followed Ghosn’s ouster.

De Meo announced a scheme to save €3bn by cutting factory capacity as part of a company overhaul last month, while Nissan aims to save ¥300bn ($2.85bn) through its own turnround plan.



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