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Real estate prices in the Corona crisis: Recession on the real estate market?

1. Are real estate prices falling due to the Corona crisis?

Anyone who has followed the news in the past few months did not have to look far to find a forecast of the possible effects of the corona pandemic. For the real estate market in Germany, new predictions have recently been made almost daily and this has led to myths about possible effects. The signs of this were not always clear and conclusive. ImmobilienScout24 has checked some of the most frequent statements and found that these have hardly been received so far and that many scenarios have spread unnecessary panic.

Our own analyzes confirm this. Kai Enders, board member of Engel & Völkers AG, was correct in his recent assessment: “Although the corona pandemic leads to a short-term shift in sales, it will not reduce the demand for housing in the long term. For many years, the need for living space in many cities and regions has exceeded the scarce supply of real estate. This fundamental trend will not change significantly in the current situation, as the reasons for the excess demand remain. " Here is the detailed statement by Kai Enders.

The crisis therefore had an effect on marketing, but not a negative one on the price development of the real estate: For example, the asking prices for condominiums rose by 13.1% from February to December 2020 - and thus even more strongly than in the same period in the previous year (+ 10.5%). For one and two-family houses, the asking prices in Germany in the 1st half of 2020 were on average 10.5% above the 1st half of 2019, while in the 2nd half of 2020 they were on average 10.3% above the 2nd half of 2019. The interest rate level, which has been low until recently, also continues to favor property acquisitions and no increase in interest rates is expected in the coming years due to the consequences of the corona pandemic.

Current real estate prices in major cities in Germany can be found here: real estate prices Berlin, real estate prices Hamburg, real estate prices Munich, real estate prices Cologne, real estate prices Frankfurt, real estate prices Stuttgart, real estate prices Dusseldorf, real estate prices Corona Hamburg

2. Development of residential property prices due to the Corona crisis

The residential property segment was particularly hard hit by reports of a slump in the market. The bursting of the bubble and the collapse of prices have often been mentioned. But there is still no sign of this at the beginning of 2021. On the contrary, real estate prices are stable and are even increasing in many places. There was also no slump in demand. Although there was a significant decline in activities during the lockdown phase, a catch-up effect can be observed afterwards: the demand for residential property is higher than at the already high pre-crisis level. Only one change in the demand behavior is to be noted: If they have good connections and infrastructure, suburbs are becoming more and more popular. The tendency to “living in the country” is also referred to as “suburbanization”.

These developments clearly show the great stability of the real estate market and will attract even more investors to this asset class in the medium term. A corona effect has so far been less noticeable than forecast. Only in a long-term economic downturn would buyers' willingness to pay decrease noticeably and have an impact on the residential property market.


At the moment, however, it seems that the real estate market will remain price stable, especially in large cities, despite the Corona crisis. Real estate has once again proven to be a safe investment, especially in times of crisis.

The increased focus on working from home could, regardless of current decisions at the beginning of 2021, also have an effect on the market: In the medium to long term, the demand for an additional, small room for working from home could increase. However, such effects will only be measurable in a few years.

Now if you think about it, aBuy propertyor to sell, our local real estate agents will provide you with professional and comprehensive information.

You can find more information on the subject of real estate price developments in residential properties on our website interactive homepage.

3. Development of commercial property prices due to the Corona crisis

Real estate prices in the commercial sector are also currently still stable. However, the individual divisions are affected to different degrees by the pandemic. While the hotel, catering and retail sectors have had a harder time in the Corona crisis, logistics and industrial real estate moved into the focus of many investors in 2020. In particular, areas such as e-commerce and food and pharmaceutical logistics recorded a strong increase in demand for space. Due to the low availability of space in the top markets, purchase and rental prices, but also the yield compression, have recently continued to rise there.
 

In view of the long supply chains through several countries, the tendency for manufacturing companies to have their own warehouses could increase and thus stimulate the market. On the office markets of the German A locations there was mostly a decline in take-up of space by more than a third compared to the previous year in 2020. The postponement of rental decisions due to economic uncertainty was decisive for the low number of lettings. In locations where in the recent past, due to high growth expectations, for example by coworking providers or start-up companies, office space was rented excessively, there was increased vacancy and partial sublet in 2020. This was reflected in an increase in the vacancy rate by 0.5 percentage points to 3.4% on average for the A locations. However, the vacancy rate, which has risen again for the first time in ten years, has had no significant impact on the level of rent, as the limited supply continues to be offset by strong demand for office space. In 2020, prime rents stagnated at a high level in Frankfurt, Düsseldorf, Cologne and Munich, while a slight increase was observed in Berlin, Hamburg and Stuttgart. How quickly and to what extent the office market will regain momentum will depend heavily on the overall economic recovery in 2021. The shutdown of public life and thus many parts of the economy is likely to lead to restrained activity on the office market, at least in the first half of the year.

The residential and commercial property asset class, on the other hand, is stable. Dirk Beller, Head of Commercial DACHCz at Engel & Völkers Commercial: „ The investment in real estate remains a safe investment. The asset class of residential and commercial buildings is not called a safe haven for nothing. It will stay that way. Because the income from the investment in a residential and commercial building is based on a large number of rental agreements. This means that they are subject to rather minor fluctuations. Anyone who invests in other forms of investment, such as stocks, cannot sleep so easy. The stock exchanges are currently showing this once again. "
  

4. Development of holiday property prices due to the Corona crisis

Even the prices for Vacation properties in Germany are affected by the Corona crisis. In times when international air traffic and worldwide vacation opportunities are considerably restricted, vacationing at home has become much more attractive. Quiet locations that offer as much privacy as possible away from the classic holiday hotspots are particularly popular with prospective buyers. Natural locations by the sea and in the mountains are particularly popular. In the coastal regions, modern thatched-roof houses are particularly popular, while open-plan rooms that allow a high level of natural light are preferred in holiday apartments.

But holiday properties are not only an interesting investment for private use. In the form of short-term rentals, many owners also use their vacation home or holiday apartment as a capital investment. Around 60% of all holiday properties in Germany are at least partially let. In the most popular locations, however, the investment hurdle can be very high due to the real estate prices. Locations such as Norderney, Tegernsee and the North Sea island of Sylt are among the locations with the highest prices. Would you like to attend this oneBuy a holiday home, You can expect top prices of up to 15 million euros for a single-family home at these locations, whereas those who want to buy a holiday apartment will pay up to 19,000 euros per square meter.

Overall, it can be said that holiday properties have been in greater demand since summer 2020 than ever before. We have summarized all prices for the top 10 locations for you:Holiday property prices & Corona.
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5. Should I wait to buy / sell my property?

Understandably, some owners and potential buyers are currently unsure of whether a real estate investment makes sense. From our point of view, however, we can take these concerns away: In view of the currently largely unchanged market situation, there is currently an economic advantage for investors and owners no reason against the Kauf or salea property. Also at low interest rates no change can currently be observed.

Engel & Völkers Board Member Kai Enders explains the fact that there are currently fewer transactions as follows: "The contact bans and curfews imposed by the federal government as well as officially ordered business closings are hindering the usual process of property brokerage." It is true that personal viewings can still be held in compliance with strict security requirements. However, with numerous bank branch closings again, it is currently difficult for investors to get a loan. Kai Enders is confident, however: “We are currently registering a number of postponements, but only a few cancellations. We assume that after the current situation has been overcome, business will continue at the previous level and that there will even be catch-up effects. "

Thanks to the modern tools from Engel & Völkers, nothing stands in the way of marketing, even in times of the Corona crisis. You can find out how a property sale currently works in the following section:

6. How does real estate sales work in the Corona crisis?

The crisis caused by COVID-19 raises the question for many owners whether a property sale can be carried out safely at this point in time. In fact, Engel & Völkers has state-of-the-art digital toolsin order to process the sale even if a personal inspection of a property is no longer possible:

Virtual tour with 360 ° camera   

In order to avoid the risk of infection in Corona times, Engel & Völkers enables you to take a virtual tour. With the help of a modern 360 ° camera of Matterport becomes a virtual 3D image of the propertywhich you can then visit as if you were on a real tour - all of this from the comfort of your own home. For this, the property only has to be recorded once by one of our real estate agents before you can approve it online for inspection. Discover for yourself how one virtual real estate tourg can look like:

Visit real estate virtually now:

Aerial photos of your property with drones

In addition to the virtual tours, we also offer you the option of marketing your Real estate from the air too to illustrate. After all, for buyers it's not just the furnishings of the property itself, but also theirs Location crucial. Thanks to our cooperation partner FairFleet, it is possible for us to market your property with impressive drone images. With the help of such recordings, you can also provide potential buyers with a perfect overview of the situation and can access nearby hotspots how schools, shopping centers and infrastructures draw attention. Here is an example of aerial photography with drones.

We advise you professionally even in times of crisis!

Even in times of COVID-19, we at Engel & Völkers are anxious to lead the marketing of your property to success or to help you find your new home. We would be happy to inform you about all of our digital options that can help you. We look forward to your contact request!