MUNICH: Germany’s once staid property market is celebrating a banner year of surging investment and billion euro deals but some voices at the sector’s annual Expo Real meeting in Munich warn

the good times will not last. Rock bottom interest rates have driven investors to seek higher yields in real estate.

They are increasingly competing for a limited supply of properties in top locations, driving up prices and trimming returns.

Office and retail space in Frankfurt, Munich and Berlin is especially sought after. Rising prices for prime locations are tempting many to risk investment in cheaper properties with higher vacancy rates or in smaller cities.

The trend is reminiscent of 2007 before the financial crisis, officials attending the Expo said, with buyers reluctantly digging deeper in their pockets and banks extending credit to avoid losing market share to competitors.

“The real estate market will remind us at some point that it is cyclical,” said Thomas Koentgen, co-head of the covered bond lender Deutsche Pfandbriefbank. Many investors have not realised that real estate is a long-term business and not suitable for short-term deals, he said.