Germany’s real estate wise in Berlin have received their pessimistic forecast for house prices. Despite Corona, the prices in the big cities have risen by 7 to 10 percent over the year.
DGermany’s “Immobilienweise” received their own skeptical forecast for the development of prices for houses and condominiums on Monday. For three years now, the independent experts, behind which the Central Real Estate Committee (ZIA) stands, have actually been expecting housing prices in Germany to fall.
In the spring, they had forecast that the Corona crisis would bring an end to the real estate boom, at least in the expensive cities. Now your sober statement is: You were wrong.
“The prices continue to rise”, said the real estate expert Harald Simons, board member of the analysis house Empirica. “You don’t see any corona effects anywhere on the housing market, nothing at all.” The prices evidently simply continued to develop according to the same trends as before.
Strongly rising asking prices
The purchase prices for condominiums in Germany rose by an average of 6.2 percent in the first six months of the year. In the particularly popular cities, the increase was between 2.9 percent in Berlin and 9.1 percent in Frankfurt. Berlin is more the exception. In a year-on-year comparison between the second quarter of 2020 and the same quarter of the previous year, the price increase in Germany averages 12 percent – in the coveted cities between 7 and 10 percent.
The real estate wise men stated that there were hardly any losses in rent payments, apparently, among other things, the short-time work allowance is stabilizing the incomes of the tenants. In addition, for many tenants, costs for an Easter vacation, going out to dinner or shopping, for example, have been eliminated during the shutdown, so that they have done comparatively well.
In any case, little use was made of the option to defer rent, and no noticeable increase in foreclosures was observed. At the same time, it can be observed that because of the low interest rates on other investments, a lot of money continues to flow into the real estate market and drive up prices.
The development of rents is also similar to that before the crisis. As a national average, the asking rent stagnated in the second quarter, but that was similar in the same quarter of the previous year. In the particularly popular cities, however, rents rose by 3 percent in the first half of the year, compared to 2.6 percent in the same period of the previous year.
An exception is Berlin, where rents have been falling for four quarters regardless of the Corona and the rent cap. On average, the landlords are now asking 5.7 percent less than a year ago. In return, the number of apartments offered for rent in advertisements is falling.
In contrast to residential real estate, the real estate types for commercial real estate expect severe corona consequences. ZIA President Andreas Mattner speaks of the “most serious turning point in the history” of commercial real estate. Retail, hotels and restaurants in particular would be hit hard. Gaps would be torn in Germany’s pedestrian zones. Unlike in the past, the catering industry could not occupy the space that would become available.
As a reaction, living in pedestrian zones is increasing again in some cases, but then more on the upper floors. However, the lower rooms would have to be used again somehow. It could become a “task for society as a whole” to prevent inner cities from becoming deserted in this context, said Michael Gerling, a real estate expert from the EHI trading institute. “The situation is dramatic for department stores, textiles and shoes.”
Corona works like a “fire accelerator” for business to migrate to the internet. For the first time this year, individual retail sectors are likely to do more business online than stationary, said Gerling. “The network is gaining market share power.”
In the case of hotels it seems to be different. Overall, many bankruptcies and loss of rent are expected. However, there are also holiday hotels in attractive locations that are currently benefiting from the crisis.
The country could benefit
The consequences of an increased home office on the market for office real estate should not be overestimated, said real estate expert Andreas Schulten from the consulting firm Bulwiengesa. In many cities there is still more demand for office space than supply, at least in the appropriate location and quality. However, the real estate agent Carolin Wandzik from the Gewos Institute said that the suburbs of the big cities and the medium-sized towns that are well connected by public transport could benefit if employers now allow around two home office days a week – and the commuting distances therefore play a smaller role.
In economic policy terms, a steady hand is now required to stabilize the real estate market, said the economics professor Lars Feld, who is both a real estate expert and an economic expert. The political decisions on the crisis are “largely to be assessed positively”, they have made a contribution to cushioning the economic effects. However, further regulatory intervention in the housing market would now weaken confidence in investments. “A full rent freeze, for example, would curb investments in a situation in which they are most urgently needed.”