An increasing number of end-of-cycle phenomena are causing widening concerns although, based upon the facts, there is still no end to the cycle in sight. However, a closer examination of the superficial case for “onward and upward” reveals details that could precipitate major changes in the mid-term.
As 2017 draws to a close, sentiment in the real estate sector appears strangely ambivalent. On the one hand, most market participants looking at the facts reach the conclusion that the German market will remain strong for the time being and, consequently, there is no cause for concern. On the other hand, they do not appear to genuinely believe in the case for “onward and upward” and are looking for indications of an imminent reversal. For the most part, they do not find anything and then start to seek out the “black swan”, one of those improbable events that occurs unexpectedly and suddenly topples the uptrend. In our opinion, however, a sober analysis of the facts suggests that the overarching trends of recent years will continue and, from a current perspective, “onward and upward” represents the scenario with the highest probability of occurence. Hence, our first key message of this analysis is: while concerns may increase, little will change fundamentally. Consequently, the fact-based overall picture that can be mapped out for the real estate sector in 2018 looks confusingly similar to that of the previous years. We believe that looking for a black swan in this picture is a fruitless exercise. Instead, we will focus on the details of the picture that we consider interesting. However, we cannot rule out that one of these details will subsequently prove to be a black swan.
Source : Savills