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Corona is changing the housing market

D.he real estate prices in Germany did not allow the Corona crisis to stop them. In the third quarter of this year, apartments and one- and two-family houses were on average 7.8 percent more expensive than a year earlier. The Federal Statistical Office reported on Monday, confirming its first estimate from November.

The price increase was the strongest since the fourth quarter of 2016 with an average of 8.4 percent at the time. Compared to the second quarter of the current year, the prices for houses and apartments in Germany climbed by an average of 2.9 percent, which is 0.3 points more than initially estimated.

The demand for living space is fueled by low building interest rates, especially in metropolitan areas. The statisticians also observed large price increases elsewhere. The prices for apartments in medium-sized cities rose the most with an increase of 10.2 percent. Houses in more densely populated rural districts were 9.7 percent more expensive than a year ago, dwarfing the price trend in the seven largest cities (plus 8.9 percent).

Rents rise more slowly

Rents also continue to rise. According to the Hamburg Gewos Institute for Urban, Regional and Housing Research, the increase flattens out in the long term at an average of 3.4 percent in the third quarter compared to the same period in the previous year. In the seven largest cities, including Berlin, Hamburg and Munich, the increase was 4.5 percent.

The pressure on rents is shifting to the surrounding area. Gewos managing director Carolin Wandzik believes it is likely that rents in the surrounding area will rise more sharply in 2021 than in the large cities themselves. The area surrounding the metropolises will also be more attractive for investors. The Institut der Deutschen Wirtschaft (IW) confirms this. “The Corona crisis intensifies the trend to migrate to the surrounding areas of large cities,” said real estate expert Michael Voigtländer.

As a result, rents in the bacon belts could rise faster than in the metropolises, where a lot of scope for increases has already been exhausted. There may be a stronger dichotomy on the rental market. The surrounding area is attracting even more families who need space, and smaller households, singles and young people dominate the cities. The metropolises have also recently grown mainly due to the influx of foreign skilled workers. But these would come less often with the Corona crisis, says Voigtländer. Smaller cities with a good range of daycare centers, schools and shops as well as good transport links to the metropolises are in demand.

Increased use of the home office reinforces the trend, as people can accept a greater spatial distance between home and work. Employees could at least partially deduct higher costs, for example for electricity, from tax. But this is not a new zest for the countryside, because there is a lack of daycare centers, schools and offers for shopping and going out.

However, a survey by the Landesbausparkassen among a good 1000 people indicates that living preferences have changed as a result of the pandemic. 34 percent said they would like to pay more attention to the balcony or garden when moving, 23 percent would like more rooms and 17 percent more options for self-sufficiency as well as a better internet connection. 15 percent each wanted a better neighborhood and an apartment further outside.

“So many wishes come down to the fact that German citizens could actually end up in the surrounding area, because most demands can be met there more easily than in the middle of the city,” the authors conclude. A full 40 percent of tenants no longer find their living situation optimal after the Corona experience.

According to Gewos, the declining influx into the big cities is also having an impact on the population, according to a recently presented forecast up to 2035. Cities like Stuttgart and Düsseldorf, but also booming Munich, are growing more slowly. Overall, however, no slumps in rents and prices are to be expected, believes Voigtländer. Apparently real estate is not as overvalued as expected and the housing shortage remains.

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