Sunday 23 April 2017

Brexit blamed for fuelling Frankfurt house price hikes

Frankfurt property prices have risen by 11.75pc year-on-year
Frankfurt property prices have risen by 11.75pc year-on-year

Joe Mayes and Will Hadfield

Brexit is pushing up house prices in Frankfurt as buyers expect wealthy professionals to move there from London, according to research by Deutsche Bank AG.

"Impetus from the Brexit vote caused prices to surge in 2016. Probably in anticipation of wealthy London bankers moving to the city, prices for family homes rose particularly sharply," the report, published last Friday, said.

Frankfurt, an established financial capital at the heart of Europe's biggest economy, has been touted as a potential beneficiary of Brexit as financial institutions consider shifting operations out of London to retain European market access. The city is home to the European Central Bank and hopes to become the new headquarters of the European Banking Authority, the regulator currently based in the UK capital.

Prices for family homes in Frankfurt are up 11.75pc year-on-year, compared to a 6pc increase across the country's other major cities, the report said. "Because of the high level of migration to Frankfurt, rents and prices are expected to continue to rise rapidly over the coming years," the report said.

Frankfurt's status as a European financial hub will be strengthened further if Deutsche Boerse AG completes its $12.4bn purchase of London Stock Exchange Group Plc, according to research commissioned by the German exchange operator.

The merger "produces a wide range of potential opportunities and positive network effects for Frankfurt as a financial centre" to counter the city's recent decline in significance, said the report, which was produced by Professor Dirk Schiereck of the Technische Universitat Darmstadt.

The report supports Deutsche Boerse's rationale to take over LSE and comes before executives at both companies meet politicians from the German state of Hesse next Tuesday in an attempt to overcome objections. Hesse has the power to block the deal.

German politicians and regulators have voiced concern about putting the headquarters of Europe's largest exchange operator in London, outside the European Union.

Political leaders in several eurozone countries have called for a rule change to force euro-denominated clearing to take place within the EU once the UK leaves the bloc. LSE subsidiary LCH is the world's largest clearing house for off- exchange interest-rate derivatives. Trading these products, which currently takes place between banks, could move to Frankfurt if the contracts can be turned into on-exchange derivatives, the report said.

(Bloomberg)

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