In times of the Corona crisis, many real estate agents are concerned that rising unemployment among the population will lead to falling demand and price cuts in the real estate industry. The Institute of the German Economy (IW) has also made similar forecasts in a study on behalf of the German Terraced House AG: Based on their analyzes, the authors of the study expect a decline in residential property prices of zero due to possible insolvencies and rising unemployment in the context of the Corona crisis up to twelve percent in Germany.
Even if many experts shared this opinion at the beginning of the pandemic, exactly opposite developments can currently be seen on the real estate market across Europe. The statistical office of the European Union “Eurostat” recorded a rise in house prices of 5.5 percent in the EU in the first quarter of 2020 compared to the corresponding quarter of the previous year. In the euro area, prices rose by a total of five percent. According to Eurostat, this is the highest annual increase since the second quarter of 2007.
This data was determined by calculating the so-called house price index (HPI). This takes into account changes in the price of all residential real estate, for example apartments and single-family houses, that are bought or sold by households in the euro area and the EU. It does not matter whether the property in question is bought new or only resold after a few years. The national HPIs created by the member states are then weighted using the GDP of the respective countries and combined into a common HPI for the EU and the euro area.
A differentiated view of the individual member states therefore reveals some differences in the price development of real estate. Among the EU Member States, according to Eurostat statistics, the highest increases in house prices in the first quarter were recorded in Luxembourg with a price increase of 14 percent and in Slovakia with a growth of 13.1 percent. Estonia (+ 11.5%), Poland (+ 11.3%) and Portugal (+ 10.3%) followed closely. Hungary was the only country in the EU that recorded a decline in house prices in the first quarter compared to the same quarter of the previous year. However, if you look at the change in relation to the previous quarter, according to the study, price reductions were also observable in other countries. These include Malta (-4.3%), Hungary (-1.1%), Ireland (-0.8%) and Belgium (-0.1%).
Nevertheless, according to Eurostat, the overall price development in the euro area and the EU is very positive with an increase of 5 and 5.5 percent respectively compared to the previous year. And according to Jens Tolckmitt, Managing Director of the Association of German Pfandbrief Banks (vdp), no negative development in real estate prices is currently expected in Germany in the second quarter either: “A massive price decline, as has been forecast at times, is currently the case despite the pandemic-induced, dramatic slump German economy of -10.1% in the second quarter of 2020 is still undetectable, ”the expert explains in a press release from August. According to analyzes by the vdp, the prices of residential real estate in Germany rose by around six percent in the second quarter as well.
DIW real estate expert Michael Voigtländer is – like many others – sure that the real estate industry will recover well from the crisis: “The residential real estate market will come through the current crisis relatively well,” predicts Voigtländer in a press release and believes despite the looming future , smaller price drops due to the pandemic in the long term continue to affect the stability of the real estate market.
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