The corona virus threatens the German economy. But could there also be positive side effects? The pressure on tenants may soon ease somewhat.
- The corona crisis has a severe impact on the economy in Germany.
- New times could also dawn when it comes to real estate - both for buyers and tenants.
- "The negotiation scope for tenants could grow again," says one expert.
Frankfurt am Main / Munich - According to economists, the corona crisis should dampen the rise in rents and property prices . Even an end to the ten-year real estate boom in Germany would be conceivable if the crisis dragged on for months and people's everyday lives remained severely restricted.
This would give air to tenants and property buyers after the rapid increases in recent years. In 2019, apartments and houses again rose by more than 5 percent, according to figures from the Federal Statistical Office. In the seven largest metropolises of Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf , they even rose by 9.5 percent for condominiums and by 6.5 percent for single and two-family houses.
Corona virus: Housing market is likely to come to a standstill - Google searches provide evidence
Given the uncertainty about the consequences of the pandemic and the initial restrictions, the housing market is likely to come to a standstill in the next two months, says Michael Voigtländer, real estate expert at the Institute for German Business (IW). "There are hardly any visits and many buyers are reluctant to worry about their jobs or expect shrinking incomes."
Google searches for buying, renting or living have already seen declines, which Voigtländer sees as an indicator. Brokers of home finance such as Hüttig & Rompf have also recently seen a decline in customer inquiries.
Corona virus: rental price boom over for the time being? Expert expects stagnation or slight declines
He expects property prices to stagnate or see a slight decline, said Voigtländer. "I doubt that the ambitious prices for new buildings, for example, can currently still be achieved." The real estate market cannot escape the economic slump that economists predict. Economists at Landesbank Helaba also believe that all property cycles in Germany have ended in recession in the past decades.
The potential for rent increases is also limited, said Voigtländer. This has nothing to do with rent covers - because incomes are likely to rise less sharply than before the crisis. In addition, new regulations on tenant protection in the event of late payment also put a strain on landlords: they may no longer terminate tenants if they cannot pay the rent due to the Corona crisis. This should initially apply to rent debts from April to the end of June, as the Federal Cabinet decided on Monday.
Coronavirus: “The rosy times for landlords are over
Large housing groups have already made concessions to tenants: For example, LEG Immobilien is foregoing rent increases or layoffs in connection with the Corona crisis. Vonovia also refrains from increasing rents until further notice due to the pandemic, and Deutsche Wohnen has promised to defer payments.
"The rosy times for landlords are over, and the scope for negotiation for tenants could grow again," says Voigtländer. "Many landlords should only be happy if they don't lose reliable tenants."
Günter Vornholz, Professor of Real Estate Economics at the EBZ Business School in Bochum, sees the situation in a similar way. "If you don't have to, you won't buy any property during the crisis or postpone moving to a larger apartment," he said. An increase in unemployment and short-time work reduces the financial scope that households have for renting. "Some contracts could be too expensive for tenants."
Corona virus and real estate prices: stock market crash plays a role - but rent collapse is unlikely
In the case of property buyers, people with equity assets had lost a lot of money in the recent stock market crash - this is now missing for buying a home. The pressure on property prices is growing, according to Vornholz. Real estate remained attractive for large investors. But it is unclear whether they will pay the high prices if there is uncertainty about the rental income. An end to the long real estate boom is also conceivable, says Vornholz. "If the corona crisis lasts long and the restrictions remain in everyday life, that could mean a change."
However, IW expert Voigtländer does not see a drop in rents and purchase prices . Price reductions of 30 percent, as some observers have already predicted, are unlikely. "The housing shortage in the cities remains, the interest on financing is low, and many people have large assets." With interest rate cuts in the Corona crisis, central banks have recently cemented the low interest rates.
Corona virus: Construction industry also affected by the crisis
The shortage of housing in the cities also speaks against falling prices and rents across the board. Nothing should change that quickly. Because the corona crisis also affects the construction industry. In some places there are delays. "Large construction companies have problems because subcontractors lack foreign workers," reports the Central Association of the German Building Industry. Construction continued in the country, albeit with increased precautionary measures. "The workers have to keep their distance and, if necessary, work in shift shifts."
dpa / AFP / fn