The real estate industry continues to try to find a way out of the crisis. That is the takeaway from the recent Expo Real trade fair in Munich. The uncertainty about how things will develop was palpable in the halls. Will transactions pick up again in the first half of next year? Or is the sector facing a year of transition?

Ultimately, the answer depends on the perspective from which the facts are viewed. If you take the shock paralysis of 2023 as a starting point, you will see a revival. If, on the other hand, the boom before the coronavirus pandemic is chosen as the comparison period, then things will still look relatively poor in 2025.

The trade fair has shown that there will be no quick recovery. Investors are still feeling their way slowly, continuing to examine investment opportunities in other high-yielding assets, and analysing interest rate trends at the long end. In some cases, there is simply a lack of capital for new investments. This means that the market is unlikely to pick up until 2026 – and if a severe recession hits, entirely different scenarios will have to be discussed.

The transaction drought is a burden for banks and investors. But it is not a catastrophe. Instead, it is a breathing space after an upswing phase that can be called historic. More importantly, it is a somewhat different crisis. There are two reasons for this. Firstly, estate agents are reporting that they are keeping long lists of companies that want to be shown potential office space. Signatures will quickly follow if the market picks up a little, because otherwise favoured locations would suddenly no longer be available. Even if one discounts the optimism typical of the real estate brokerage profession, that insight holds up. Unlike during the 2008 financial crisis, demand has not dried up, and this applies to almost all asset classes.

Secondly, a technical, financial circumstance is preventing valuations from plummeting. While property loans reached around 80 to 90% of the mortgage lending value in 2008, the equity ratio today is far higher than it was back then. As a result, devaluations rarely lead to banks forcing owners to sell. Borrowers may have to pay higher interest rates or add a little equity – that's usually it. Distressed sales at meagre prices are the exception, unlike during the financial crisis. This supports valuations.

This effect can be illustrated well using the example of major Anglo-Saxon investors. In New York, for example, they have seen the value of offices fall by a good half, while vacancy rates are somewhere in the region of a fifth. Their conclusion has been to fill the war chest, because that's what will happen in Germany too – and then they can go bargain hunting. But this is far from the truth. Although the local market is under stress, it is also far more robust than had been feared. On average, across all asset classes, values may have fallen by 15%, but offices are up to 35% cheaper. Private equity will have to invest the stashed money elsewhere.

One thing is also clear: Because the Germany economy is unlikely to go under, the property market will pick up again at some point. The current interest rate level is no obstacle to this. Anyone who has money to spare, and no unrealistic yield targets, can do good business.

As soon as transactions pick up, banks are likely to raise the valuation levels in their portfolios, that third party valuers have pushed down. This will free up equity, as loan-to-value ratios are adjusted. This freed-up equity then enables new business. It will be interesting to see whether this works quickly enough – or whether the regulations are too strict.