After a continuous real estate boom even during the Corona crisis, economists expect slightly less price pressure in the new year. “Housing markets in Germany are surprisingly strong,” said Stefan Mitropoulos, economist and real estate expert at Landesbank Hessen-Thüringen (Helaba). “We can’t expect a decline, but rather a rest.” A pandemic is likely to dampen price growth. Instead of rates of five to six percent a year, flats and houses could rise by four percent in 2021.
Michael Voigtländer, a real estate expert at the Institut der Deutschen Wirtschaft, anticipates that prices will no longer rise so sharply in the new decade after the long boom. “Interest rates on real estate loans have fallen sharply and the huge boom in the labor market cannot simply be repeated.”
With the crisis in Corona, some experts expected the year-round real estate boom to end. During the spring shutdown, the housing market stopped, there were no ads and almost no visits. However, apartment and house prices continued to rise – despite the historic collapse of the German economy with millions of short-term workers and rising unemployment.
In the third quarter, residential real estate increased by 7.8 percent compared to the same period last year. According to the Federal Statistical Office, this was the strongest price increase since the end of 2016. Prices have risen sharply not only in metropolises, but also in medium-sized cities and more densely populated rural areas. Growth was also strong in the summer quarter, up 6.6 percent. Not a trace of the crisis.
“The influx of real estate is uninterrupted,” said Thomas Krahl, who runs the real estate business with the asset manager Deutsche Oppenheim. There is great interest in the asset class – as well as the willingness to pay higher prices. “While 25 times the annual rent was considered expensive some time ago, today 28 to 30 annual rents are also accepted as the purchase price.” Wealthy families bought a whole portfolio of apartments in the cities.
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Mitropoulos believes that this year is likely to change little in people’s regional life preferences. “People are moving where there are jobs.” This is a metropolitan area, although the area is becoming more attractive due to home offices and high prices in large cities. Those who also work from home and no longer have to go to the office every day can take longer commutes. During downtime and home offices, many people wanted more space, a balcony or a garden. This is more likely in bacon strips than in the expensive centers of Berlin, Munich, Hamburg and Frankfurt.
Pressure on large cities could be reduced somewhat
The desire for a small house in the country drives the demand for houses. Family and family house prices rose 8.6 percent in the third quarter, according to the Hamburg-based research institute F + B. Bernd Leutner.
However, the pressure on large cities may have eased a little. According to the Hamburg Gewos Institute for Urban, Regional and Housing Research, it is unlikely that its population will grow that much in the coming years. Cities such as Stuttgart and Düsseldorf, but also the thriving Munich, are growing more slowly – as more people move to the area and the immigration of foreign skilled workers in the pandemic declines. “Companies are cautious about new employees and travel restrictions have slowed mobility,” said Gewos CEO Carolin Wandzik.
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If the real estate boom continues, it will be the first time in decades that the housing market has continued to recover despite a deep recession. There is a lot to be said, says Gewos. The main drivers of the boom remained intact despite the corona crisis. “These include high demand for housing due to demographics, lack of building land and real estate, as well as low interest rates associated with a lack of alternatives to investing in uncertain times.”
The residential house with old apartments is located in the Grindelviertel in Hamburg. Photo: dpa / Markus Scholz
“Part-time work has mitigated the economic consequences of the pandemic and the crisis has hit marginalized workers in particular,” explains economist Mitropoulos. As a rule, however, they still rarely bought real estate. In addition, some major investors left their hands on hotels, retail properties and offices during the Corona crisis and focused more on housing markets that are considered safe.
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In addition, the new building still does not meet the federal government’s goal of building approximately 375,000 apartments a year. The shortage of flats will not change in the foreseeable future.
After all, the growth of construction prices is falling.
With the launch of coronavirus vaccination, the economic outlook has become clearer, says Mitropoulos. As a result, the labor market situation should improve again, which will also support housing markets. “I don’t see a big break.” (DPA)