The whole world knows only one topic, about which the thoughts turn endlessly – with private individuals as well as with companies. The Federal Ministry of Economics expects a severe recession in Germany due to the corona crisis. According to an Ifo survey of 155 economists, the country could only survive nationwide company closings for around eleven weeks. This is how long the economy could cushion a shutdown “before the risk of economic destabilization becomes too great,” say the Munich researchers – “an average of eight weeks is cited as an upper limit”. But what happens in the construction, real estate and housing industries afterwards? A scenario in ten forecasts:
The construction industry is stalling
In view of the Corona crisis, the German construction industry is currently not venturing a sales forecast for 2020. So far, the operation on the construction sites has been largely normal, reports the Main Association of the German Construction Industry (HDB). However, there is a risk that production will be slowed down by delivery bottlenecks, illnesses in the workforce or official measures. “The probability of occurrence remains uncertain, but the effects could be immense.” In view of the severity of the expected recession, Landesbank Hessen-Thüringen (Helaba) assumes that the upturn in the German real estate market has ended.
Building finance collapses Even the Berliner Sparkasse has not yet made a forecast for 2020. Johannes Evers, head of the largest German savings bank in terms of customers, says, “We had a booming mortgage lending business by the beginning of March.” Now demand has weakened. People wondered whether they should borrow money for a home in the crisis. Last year, the institute's result after taxes was 103 (2018: 103) million euros and thus also thanks to real estate financing five million euros above the planning. “Credit defaults will increase,” said Evers. This applies to private customer and corporate customer business.
Construction activity declines
2019 were in Germany granted more permits for the construction of housing. The number rose by 4.0 percent over the previous year to 360 600, according to the Federal Statistical Office. But: “Building permits are not orders, we all know that,” says Felix Pakleppa, managing director of the Central Association of the German Building Industry (ZDB). “If building authorities are weak or not staffed at all because of the virus, then no public contracts will be awarded,” he said. Many employees of the construction and city planning offices are technically unable to work in the home office. The Architects and Engineers Association in Berlin has to consider this.
Construction contracts are declining
If companies lose a lot of orders, investments should be put on hold – with a corresponding impact on commercial construction. “If people are threatened with sudden unemployment, they will not build a house or commission renovation work,” says ZDB managing director Pakleppa. Construction consultant Tibor Desczyk (Berlin) also believes that investments will initially be put behind. The federal grants from the Corona rescue package would not cover the running costs. After the crisis, it would first have to be seen which (supplier) companies would have survived economically.
New leases are becoming more difficult
Many prospective customers are likely to face the high uncertainty regarding employment and income prospects, at least in the short term, postpone the planned purchase of a home or move to a new rental apartment. Residential property prices could therefore decline somewhat, especially in the expensive locations of large cities. “Commercial real estate could suffer in the course of the corona shutdown and also in the aftermath, since some tenants will probably have to file for bankruptcy,” said Uwe Eilers, CEO of FV Frankfurter Vermögen AG, Königstein. Renting will no longer be that easy, which will lead to increased vacancy rates.
Number of foreclosures is increasing
The real estate market has been booming for a decade. The high demand for apartments has caused the number of foreclosures to fall further and further. But now the economy is turning. “We expect that 2021 significantly more foreclosures will come onto the market,” says Axel Mohr, whose publisher for business information (“Argetra GmbH”) analyzes the foreclosure market in Germany every year. First of all, owners who have taken out a loan are still protected by law. Private landlords who may themselves be in need due to loss of rent can also check whether they themselves can suspend payment of the building loan. But at some point the loans have to be serviced again; the contract is terminated. The Dr. Klein Privatkunden AG, one of the largest financial service providers in Germany, points out that interest and principal payments are only deferred and not waived. The loan contract is usually extended by the deferral period. “The property will inevitably be available at some point,” says Mohr. The previous high point was around 92 500 appointments in the year 2005.
Small-scale landlords are in need
The federal government's moratorium on rents could drive landlords into bankruptcy. “We warned of this law from the start. Without a fund that pays the rent, millions of private landlords face financial hardship, ”says Kai Warnecke, President of the Real Estate Owners Association Haus & Grund. “Many landlords who are financially able to show solidarity with their tenants. But not every landlord can do this and not every tenant is in need per se. ”66 Percentage of all rental apartments in Germany come from a total of 3, 9 million small private landlords offered. They come from all social classes. 39 percent are pensioner households that rely on rental income to be able to make a living. 14 Percent of private landlords are freelancers who often get into difficulties due to the Corona crisis.
Tenants are in need
Part of the latest package of Corona special laws provides for the termination of layoffs due to rent and lease arrears caused by the pandemic between April 1st and 30. June 2020 are conditional. The period of insolvency can be extended by ordinance of the federal government. However, the accrued rental debt must be paid by 30 at the latest. June 2022 will be redeemed. Until then, their deferral and the associated ban on termination apply.
In addition, the Berlin Senate had on 24. March 2020 a package with further measures was decided and financial help for tenants was promised. Tenant association managing directors Reiner Wild and Maren Kern, board members of the Berlin-Brandenburg Housing Association (BBU) call for a “safe living fund” from which rental payments could be covered in part or in full in the form of grants if necessary.
Furnished rooms without customers
Missing guests by Covid 19 implodes the business models of hotels and furnished apartments. Can the branch change the way the rooms are used? “Since many accommodations are located in well-located locations within the cities and are therefore easy to reach, they could be transformed into locations that are more suitable for the isolated accommodation of Covid – 19 – serving patients, ”suggests Ann-Katrin Kaiser. “As isolation centers, they could relieve the capacity of hospitals,” says Associate Director EMEA Hotels Investment at Savills, a global real estate service provider. Meanwhile, US housing broker Airbnb has provided 250 millions of dollars to offset losses from hosts around the world whose guests have canceled bookings in the face of the coronavirus pandemic . The help that hosts 25 percent of their normal cancellation fees would be offered worldwide except for China, writes Managing Director Brian Chesky in a letter to the landlord. Payments would be made for the cancellation of reservations with check-in dates between 14. March and 31. May apply.
Less demand for office space
In the short and medium term, in the course of the economic downturn, a significant decline in demand for office space can be expected the real estate consultancy Wüest Partner Germany. It already has a significant decrease in rental performance, e.g. stated in Frankfurt. As a result, office rents are likely to stagnate, decrease in many locations and vacancies and loss of earnings will increase.
The decline in demand for coworking space will have the first impact. The Berlin coworking provider rent 24 reduced the rents: “We now want to set an example in our over 70 locations throughout Europe, the USA and Israel – and that means fast support through financial relief and professional advice “, says Robert Bukvic, founder and managing director of rent 24. “The corona crisis also hit us hard, but I decided to take this step. In the current exceptional situation, we do not consider it fair to impose the usual contractual terms on entrepreneurs in need. ”
Assistance: Ulrich Springer