Naturally, it is yet too early to assess the overall ramifications of the coronavirus crisis for the German economy in general and the real estate market in particular, but—for what it’s worth—it is safe to observe that the residential property market has remained stable so far. The latest housing index compiled by the F+B research institute reveals that neither condominium prices nor residential rents have softened in the wake of the coronavirus crisis. Although the number of listed apartments did take a nose dive after the onset of the pandemic, it has lately rebounded (source: www.welt.de).
The number of condominium listings, for instance, declined by around 30 percent between early March and mid-April, according to the F+B survey, only to surge noticeably after Easter. The spikes for rental flats were even more drastic, but the overall picture was very similar (source: www.spiegel.de).
The trend in residential property prices shows that the discounts many had dreaded as a result of the coronavirus pandemic did not eventuate, quite on the contrary. The asking prices for condominiums followed an upward trend both during the entire first quarter of 2020 and during the time period between early March and mid-April that was most affected by the coronavirus pandemic. During the first quarter, the growth over prior-year quarter amounted to 6.1 percent. Between early March and mid-April—or between calendar weeks 10 and 16, to be exact—prices of available condominiums went up by 2.6 percent (source: www.f-und-b.de).
To be sure, the F+B survey says little about the medium- and long-term ramifications of the pandemic for the housing market. But even during the lockdown in March and the first half of April, average asking prices across Germany, rather than softening, actually increased, suggesting a particular robustness of the residential property market.
Deutsche Bank, too, conducted an analysis which concluded that the price cycle on the residential property market continues. The structural factors that have defined the cycle so far—such as pent-up demand and the low interest rate environment—are still at play despite the coronavirus crisis, or so the survey findings suggest. While convinced that the market will experience a price dip, Deutsche Bank also assumes that it will stabilise in the medium term (source: www.handelsblatt.com).
The IW German Economic Institute in Cologne went so far as to conclude in a survey that property owners need “not worry” and that the housing market would “emerge largely intact” from the crisis. The institute went on to predict that prices will not, or will barely, soften in response to the coronavirus pandemic, at worst by twelve percent. Although they conceded that the economy as a whole would take a blow, the lower level of interest rates would cushion the deterioration of prices. This is all the more reasonable to say because there is no evidence for a serious decline in rent rates, a fact that in turn bolsters the price growth (source: www.iwkoeln.de).
Meanwhile, the bleakest downside case was outlined by the empirica research and consultancy institute. It projects that prices could decline by up to 25 percent and not stabilise until late 2021 (source: www.empirica-institut.de). However, it should be mentioned in this context that empirica has warned of an imminent decline in condominium prices for several years now without having been borne out by events (source: www.handelsblatt.com).