There are a number of interesting trends in Frankfurt at the moment in particular in the property market. There is already a tight market when it comes to housing with prices higher than pretty much any other large city in Germany and properties disappearing very quickly from the rental market. Brexit however has given the market an extra push.
Very few people saw this coming, but immediately Frankfurt was being touted as the main beneficiary of the result. And there are plenty of people looking to benefit personally by investing now in property in order to win on the rental market and price inflation in a couple of years time. Riedberg, Gallus and Ostend are all areas with a lot of new-build, luxury apartments and a bubble is beginning to appear. And with many central bankers speculating that we could be entering a prolonged Japanese style low/no interest rate decade, mortgages are going to be attractive for a while.
But aren’t people jumping the gun a little? Seems like a risky time to buy property. Prices in Frankfurt are already inflated both for purchase as well as rental and the economy is not so buoyant. Plus there could be some rough times ahead for the Eurozone. In particular, Frankfurt is not the only choice for all of these banking jobs which people expect to relocate to the EU. In particular, Dublin has often been suggested as a competing if not more attractive option. Aside from pubs and Leprechauns, the country is English speaking, innovative, within easy reach of other EU capitals, already attractive for US companies, and has very attractive corporate tax rates.
I had the benefit of visiting this week and talked to quite a few people in the finance district here about the comparison and it seems clear. Even according to people already in Dublin, there is no competition: the jobs will go to Frankfurt. And not because the above reasons aren’t true but because of the natural limitations of Dublin. If Frankfurt has a housing and schooling shortage, it is worse in Dublin with no sign of an improvement. What’s more, there is no sign of a significant improvement of the housing or school system. On top of that, Dublin simply can’t compete with Frankfurt when it comes to the public transport network and the road network leading into Dublin is completely clogged up during rush hour. And add to this the cultural and leisure options in Frankfurt along with the easy connections to other European cities and Frankfurt will win most decisions.
So, time to invest in the Frankfurt housing market? Only if you believe the hype about all of the jobs that are coming to Frankfurt. Estimates are currently running at anything from 10-100,000 finance jobs. But before you get excited, don’t forget that at least at the moment, the British market is actually looking quite good at the moment post-referendum and with the 10% drop in the pound, there is a bit of an FDI and export boom going on. By comparison, the German and other European markets are the ones who have been hit worst by Brexit as people speculate on which country will be next to leave the EU experiment.
Which acronym will we be seeing next splashed across the headlines? Czexit? Grexit? Hexit?