How the real estate market will develop after the coronavirus crisis is the subject of controversial debate among market experts. While some economists expect prices to fall considerably, experienced estate agents believe that the real estate market will remain virtually unchanged. However, it is already clear that residential property prices are continuing to rise, at least in the major cities.
Despite the coronavirus crisis, condominiums were on average 1.3% more expensive in the second quarter of this year than at the start of the year. The latest residential index from research company F+B shows an increase of almost 6% compared to the second quarter of 2019.
The increase in condominiums was surprisingly exceeded this time by the price increases for detached and semi-detached houses. These increased in price by 2.9 percent compared to the previous quarter and by as much as nine percent year-on-year. This trend is particularly unusual, as prices for condominiums in Germany have almost always risen much more sharply than those for houses over the past ten years.
Price increase for single-family homes
The housing index does not provide any information on whether the sharp rise in the price of single-family homes is due to increased demand resulting from the coronavirus crisis, for example because families are looking for more space and gardens - the temporal correlation is certainly striking. One possible explanation from economists is that the effects on the real estate market always occur with a time lag. Price reductions are still possible and are closely linked to the further course of the coronavirus crisis
No increase in rents
Unlike purchase prices, rents have hardly risen at all over the past two years. In the second quarter, too, there was only a minimal increase in new contract rents. Compared to the previous quarter, they rose by 0.4 percent and by one percent year-on-year. Existing rents rose by 1.3 percent year-on-year.
The real estate boom in Germany has been going on for a good ten years now. A correction would therefore not be unexpected. The long-lasting strong economy, rising incomes and the housing shortage in cities have driven up prices enormously in many places. Low interest rates are also making real estate financing cheap and investors are increasingly looking for returns in the housing market.
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