News & Updates Germany real estate market: No Corona discount

AUGUST 26, 2020 SOURCE: Handelsblatt GERMANY

Some economists had expected the corona crisis to slow house prices. But recent figures show significant increases. 

The Corona crisis has not given property buyers a chance to buy cheaper prices. In the second quarter, prices for apartments and houses in Germany continued to rise. According to an initial estimate by the Federal Statistical Office, property buyers had to put on the table 5.6 percent more in recent months than in the same quarter of the previous year. Compared to the first quarter, apartments and houses were 1.4 percent more expensive. 

These figures are only a quick estimate, which is fraught with some uncertainty, the Wiesbaden statisticians warned. But the numbers are not a big surprise: after all, real estate prices have been on the rise. At the beginning of the year, for example, the experts of the Federal Statistical Office reported a rise in real estate prices of 6.8 percent in the first quarter, and an annual rate of 0.3 percent in the final quarter of 2019. 

No Corona Discount 

Those hoping for a Corona tee shot were disappointed. "It would have been conceivable that property owners would have to sell because they were in financial distress – but that has not been the case so far," says real estate expert Reiner Braun of the analysis institute Empirica. "With generously granted measures such as short time working allowances and housing benefit, the Federal Government has prevented major rent losses and mass redundancies. There were no emergency sales that could have depressed prices." The big question now is whether this will change if there is a second wave in the corona crisis. 

In the long term, however, according to experts such as Braun, house prices will continue to rise even after a possible dent. "We simply have too few apartments and too little building land. This suggests that prices continue to rise – especially as interest rates remain so low." 

 

Off to suburbs 

In search of an affordable property, therefore, more and more Germans are migrating from the big cities to the suburbs. Because there you can actually find cheaper properties: Those who are willing to move out of the city for up to an hour drive distance can save up to 52 percent when buying a house, according to a recently published study by the real estate portal Immowelt. 

The closer to town you look to a property, the lower the price advantage, after demand – and prices – have risen sharply there in recent years. 

Nevertheless, it should be noted that many of the existing properties in the surrounding area require renovations, which must be added to the purchase price. In addition, according to Immowelt, the houses are often located right by the road and not necessarily corresponding to the full wish of an idyllic country life, especially in the smaller villages. Nevertheless, there are numerous properties that are either newly built or renovated and are nevertheless significantly cheaper than within the city limits. 

Corona will make the suburbia properties more expensive 

For the study, Immowelt examined the prices of single-family homes in eight selected cities and their surrounding areas. The biggest savings are in the Frankfurt area: instead of 695,000 euros in the urban area, houses in the 60-minute zone cost an average of 337,000 euros. In percentage terms, the difference is greatest in Hamburg (49 percent) and Stuttgart (47 percent). 

In Munich, too, the price differences are glaring while single-family houses in the city cost 1.19 million euros on average, with a one-hour commute they are 649,000 euros. This is a saving of 45 percent, or just over half a million euros. It is noteworthy that a house in Munich within a 60-minute radius is still more expensive than one directly in Berlin, Hamburg or Cologne. 

Immowelt expects the Corona crisis and the increasing introduction of home office work to increase interest in the Suburbs. It opens the possibility for many families to live further outside the cities. "This would allow demand to be more distributed in the future and prices to be more adjusted." 

The data base for the calculation of the purchase prices was created from offers posted on the Internet portal. Only offers that were increasingly in demand were considered. The prices give the average of single-family homes offered in the second half of 2019 and the first half of 2020 as well as in the same period of the previous years. 

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