How the corona virus could affect the real estate market

According to economists, the Corona crisis should dampen the rise in rents and property prices. Even an end to the ten-year real estate boom in Germany would be conceivable if the crisis dragged on for months and people's everyday lives remained severely restricted. This would give air to tenants and property buyers after the rapid increases in recent years. The crisis has already reached the largest digital broker of objects “Scout 24” : Their boss Tobias Hartmann spoke of a “decline in visits” and downloaded apartment exposés – and cashed in the annual forecast for the listed company.

“How quickly the engine will start again and how strong we cannot say today,” said Hartmann. In order to get the providers of apartments and commercial real estate out of the shock caused by corona, private landlords can even put their properties online for four weeks free of charge on the largest market exchange. There are also discounts and deferrals of invoices for brokers.

“Immoscout added individual furnished apartments that may previously have been offered to tourists,” said a spokesman. But that is not a trend. Unlike in the USA, for example: The regular rental apartment markets are flooded with Nashville, New Orleans or Honolulu with offers of properties previously used as temporary apartments, data analysts from the USA report.

No similar development can be seen in Berlin so far. Airbnb offers a free cancellation of all bookings made until 14 . April.

Michael Voigtländer, real estate expert at the German Economic Institute (IW), estimates that the housing market will come to a standstill in the next two months. “There are hardly any visits, and many buyers are reluctant to worry about their jobs or expect shrinking income.”

Background on the corona virus:

  • Virologist Drosten: “Perhaps we have to assume that we will spend a year in Spend state of emergency “
  • The Covid – 19 – Map of Germany: See here all coronavirus infections by counties and federal states
  • With face masks against the corona virus? What really protects against the transmission of germs
  • cashier via the corona lockdown : “Today it was worse than ever before!”
  • Follow the events related to the corona virus in Berlin in a separate live blog

Google searches for buying, renting or living have already seen declines, which Voigtländer considers an indicator. Brokers of home finance such as Hüttig & Rompf have also recently seen a decline in customer inquiries.

He expects property prices to stagnate or see a slight decline, said Voigtländer. “I doubt that the ambitious prices for new buildings, for example, can currently still be enforced.” The property market cannot escape a slump in the economy, as economists predict.

In Berlin, the purchase prices of residential real estate had risen sharply once again, according to the market report published by the state-owned development bank IBB on Wednesday: Buyers paid for a home each year 2019 on average 550000 – ten percent more than a year earlier. The prices of condominiums also rose from 4360 to 4770 euros per square meter. In terms of rents, stagnation was evident even before the start of the Corona crisis: With 10, 45 per square meter for a free apartment on average measured in terms of Berlin's low income compared to metropolitan areas, it has apparently reached a limit.

Economists at Landesbank Helaba state that all property cycles in Germany have ended in recession in the past decades. The potential for rent increases is also limited, said Voigtländer, because incomes should rise less sharply than before the crisis.

Schwerer Stand. Auch in Brandenburg wird sich die Krise auf die Immobilien auswirken.

Difficult situation. The crisis will also affect real estate in Brandenburg. Photo: Patrick Pleul / dpa

In addition, new regulations on tenant protection in the event of late payment also burden the landlords: they may no longer give tenants notice because they cannot pay the rent due to the Corona crisis. This should initially apply to rent debts from April to the end of June, as the Federal Cabinet decided on Monday.

Large housing groups have already given tenants concessions: For example, LEG Immobilien is foregoing rent increases in connection with the Corona crisis or terminations. Vonovia also refrains from higher rents until further notice due to the pandemic, and Deutsche Wohnen has promised to defer payments.

Even Deutsche Wohnen, with 116000 apartments in Berlin's largest private landlord, has a 30 million euro fund launched to support tenants particularly affected by the Corona crisis are.

“The rosy times for landlords are over and the scope for negotiation for tenants could grow again,” said Voigtländer. “Many landlords should only be happy if they don't lose reliable tenants.”

Unemployment and short-time work reduce financial scope

Günter sees something similar Vornholz, professor of real estate economics at the EBZ Business School in Bochum, the location. “If you don't have to, you won't buy any property during the crisis or postpone moving to a larger apartment,” he said. An increase in unemployment and short-time work reduces the financial scope that households have for renting. “Some contracts could be too expensive for tenants.”

In the case of property buyers, people with equity assets had lost a lot of money in the recent stock market crash – this is now lacking for buying a home. The pressure on property prices is growing, according to Vornholz. Real estate remained attractive for large investors.

But it is unclear whether they will pay the high prices if there is uncertainty about the rental income. An end to the long real estate boom is also conceivable, says Vornholz. “If the Corona crisis lasts long and the restrictions remain in everyday life, that could mean a change.”

“The housing shortage in the cities remains”

However, this is not to be expected in Berlin. The head of the state-owned development bank IBB said on Wednesday that around 145000 apartments are missing in the city. More and more households no longer even have a room for every family member. The Berlin Tenants Association warned on Wednesday: “The construction of apartments for broad sections of the population is making no progress”.

IW expert Voigtländer also does not expect rents and purchase prices to collapse. Price declines of 30 percent, as some observers already predicted, he considers unlikely. “The housing shortage in the cities remains, the interest for financing is low, and many people have large assets.” With their interest rate cuts in the Corona crisis, central banks have recently cemented the low interest rates.

Also on the Housing shortages in many cities are unlikely to change so quickly. Because the corona crisis also affects the construction industry. The boss of Berlin's medium-sized “Fachgemeinschaft Bau” Manja Schreiber reported bottlenecks in the delivery of concrete for the shell and overloaded building rubbish dumps. This may have something to do with the corona-related closure of the borders, which is stopping building materials and industry employees. “Large construction companies also have problems because subcontractors lack foreign workers,” reports the Central Association of the German Building Industry (ZDB). Construction continued in the country, albeit with increased precautionary measures. “The workers must keep their distance and if necessary work in shifted shifts.”

(with dpa)