The real estate market remains on course

At the beginning of the coronavirus pandemic, there was some speculation about whether the crisis would bring an end to the real estate boom. However, demand for real estate has actually increased since the lockdown. According to current figures, the uncertainty caused by the crisis has intensified the desire for solid, tangible assets. Owning one's own home is becoming more important than ever.

A recent survey conducted by RE/MAX Germany among 25 top real estate agents in the network confirms the findings of other data collection and consumer surveys. Two-thirds of the network's agents have observed increased buyer interest in recent weeks. Only one in three prospective buyers is taking a wait-and-see approach, as many find the (labor) market too unpredictable, especially regarding the future development of the crisis. Ninety percent
of this group is waiting for prices to fall. "Many buyers are hoping that property prices will decline in the future," explains Kurt Friedl, CEO and partner of RE/MAX Germany. "However, we are seeing
that prices are stable, at least in metropolitan areas, and could even rise further in the future."

This could also be due to the currently observed imbalance between supply and demand: 66 percent, or two-thirds, of the customers in RE/MAX's database are actively interested in buying. On the seller side, however, only 50 percent of registered property owners show a strong interest in selling; the other half are taking a wait-and-see approach.

The demand for housing is being intensified by a phenomenon brought about by the pandemic: working from home. Many people want to permanently set up their workspace at home. "People are therefore increasingly investing in their own homes," explains Friedl. In addition, many investors have lost confidence in stocks and prefer investments in solid, tangible assets that are independent of the stock market. Friedl also points out that many buyers
want to take advantage of the still extremely low interest rates on loans. "Our business has gained considerable momentum following the nationwide easing of restrictions in recent weeks," he concludes.

The assessment that real estate remains a profitable investment despite, or even because of, the crisis is confirmed by further studies. The research and consulting firm F+B, for example, has so far seen no signs of a decline in asking prices. The fact that no discounting behavior can be observed on the seller's side is an indication "that providers apparently see no need to stimulate buyer demand with reduced asking prices," explains F+B Managing Director Dr. Bernd Leute in a press release.

Large real estate portals such as Immowelt also report increased demand for all types of real estate compared to the same period last year and a massive increase in contact requests for real estate offers, even by 49 percent for houses compared to the same period last year (as of May 2020).

The undiminished interest in borrowing is also confirmed by a survey conducted by Wirtschaftswoche, which revealed that almost all of the surveyed credit institutions issued even more loans than in the record-breaking previous year of 2019. The cooperative banks (Volksbanken and Raiffeisenbanken) recorded their highest loan growth in 20 years in the first quarter of 2020. The savings banks (Sparkassen) revealed to the Süddeutsche Zeitung that loans worth €5.5 billion were issued in April, the month of the lockdown. This represents an increase of 12.1 percent compared to the same month of the previous year. However, a large portion of these loans had already been negotiated before the crisis.

But even now, investors and owners should not be afraid to invest, says Michael Neumann, CEO of Capital AG: “As long as the uncertainty caused by the coronavirus persists, the interest rate situation will not change.”

For those who still have secure jobs, the pandemic could pave the way to homeownership. Owners who want to sell their property now have good chances of success, especially since low interest rates allow buyers to finance larger sums.

Conclusion: The initial shock has subsided, and the German real estate market is proving surprisingly resilient in the face of the crisis. The mood is positive, as evidenced by a survey conducted by the German Real Estate Association (IVD) among 6,000 real estate agents, property managers, appraisers, and project developers: Respondents even anticipate a price increase of four to five percent for the entire year of 2020. However, it remains to be seen how the financial losses suffered by households due to short-time work and the economic downturn will affect the real estate market, which typically reacts more slowly to economic fluctuations. The pandemic is not yet over, but the desire for homeownership is growing with the crisis.

Sources: biallo.de, boerse-online.de, bundestag.de, haufe.com, immobilienwelt.de, sueddeutsche.de, wohnglueck.de