The corona pandemic has crippled the hotel business around the world. Business trips are taboo, tourists are hesitant to go out or are not allowed to travel from high-risk areas. New exclusions are emerging in many countries. Difficult times have begun for hotel operators, real estate companies and banks. The effects of the crisis are also being felt by investment companies. You can’t predict anything at this time. But how should the residential and commercial real estate markets be assessed?
According to a study by the consulting company DIW Econ (Berlin), there will be a shortage of approximately 1.2 million flats in the main European capitals by 2030. Berlin alone needs about 119,000 more flats by 2030 – about eight percent more than it already has. In the period 2016–2020, the Institut der deutschen Wirtschaft (IW) came up with an arithmetic need for new construction of almost 342,000 flats per year, which was not satisfied with the actual new construction. For example, in 2019, a total of 293,000 new flats came on the market. The ifo completion forecast for 2020 is 275,000 housing units.
With this in mind, Thomas Hofer, head of the real estate and financing market at the Association of German Banks Pfandbrief (Vdp), expects a 2.9 percent increase in housing investment. He does not expect the corona pandemic to cause a dampening. Investments in housing construction are, on average, about half of the debt financed and housing loans make up about half of the total economic output (gross domestic product) – the parameters would be stable even during the corona crisis, Hofer said at this year’s Vdp real estate forum. “The effects of Covid 19 have been very weak so far,” Hofer said in mid-September. The sector recorded a “strong first quarter”. The figures are 8.6 percent higher than in the comparable quarter of the previous year. “Requests for deferral withdrew from mid-May to the end of June, and the share of loans affected by deferrals in the entire mortgage bank loan portfolio was two percent,” the banker said. Home finances make up about three-quarters of lending.
Real estate prices are running out of income
However, Hofer expects banks to be more cautious in lending, especially as property prices run out of earnings: loan amounts are rising. A higher share of borrowed funds is made possible by lower interest rates. According to Hofer’s observations, low interest rates are not used to finance more expensive real estate, but to repay loans. The share of borrowed funds in residential real estate has now reached 82 percent; In 1992, this share was 67 percent.
Tobias Just, a professor of real estate management at IREBS International Real Estate Business School (University of Regensburg), does not see the pandemic as a market crisis, but as a “shock”. The rise has stopped, uncertainty is the prevailing mood in the real estate industry. The flight to quality values can be observed in the residential and logistics asset classes.
In terms of investment, banks preferred cities A to cities B. Cities A include Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart. Project developers and investors are currently less likely to rely on offices. It is difficult to say whether working from home will remain a permanent trend. “Because the demand for offices is questionable, the office is no longer a new way of life,” says Just. “There are many discussions about asset classes, especially risks.” Institutional investors, such as insurance companies, remain major players. “Developers and real estate developers are more cautious,” the scientist said. At present, a shift in the share can be observed: “Hotels, healthcare, retail are declining, housing and logistics are clearly above average; Offices are hardly above average. “
The use of space in Germany’s largest office markets did not recover significantly in the third quarter either. The Thomas Daily Industrial Service came to this conclusion from the quarterly reports of the brokerage companies BNP Paribas Real Estate, CBRE, Colliers International, JLL and Savills.
New rents are rising
However, the new lease increased by more than three percent, said Vdp CEO Jens Tolckmitt. According to Just, the retail sector has lost half of its shares in commercial real estate since 2010. With regard to the pandemic, and thus with regard to economic and political developments, many questions remain. “Who tells us that the apartments that were built in 2019 will not be included in the rent limit?” Says Tolckmitt. The real estate market is a lagging market: “You do not know what will come, but you can relax by looking at the residential real estate market.” This was also suggested by the German savings bank and Giro in an economic policy paper in September (“The German Housing Market: Corona and consequences “):” Since it can now be assumed that construction activity will roughly maintain the pre-crisis level, despite the bottlenecks related to Corona, the direction and dynamics of purchase prices in the coming months and also in 2021 will depend more on demand and supply determinants. . “