The pandemic is also leaving its mark on the real estate market. However, not as strongly as some experts might have suspected months ago. Although prices are no longer rising quite as strongly as in previous years, they are still clearly on the rise this year. In this article we have summarised the impact of the pandemic on the industry and whether buying a house in 2021 is more appropriate or inappropriate.
The influence on property prices thanks to Corona
The impact of the pandemic on the housing market, which some feared, has largely failed to materialise. Home ownership is therefore still in strong demand and the effects of the crisis are only influencing property prices in some areas. The sometimes extreme price increases in metropolises such as Munich or Berlin have eased somewhat in the past months of the pandemic and are easing somewhat. Now that home offices and a good infrastructure for working life are becoming more important again, this is leading to inner cities becoming even more popular than villages on the outskirts. This is also due to the fact that, for example, fast internet is becoming increasingly important when working from home. Experts are therefore talking about an initial suburbanisation or even an urban exodus.
This is how the market will develop
The forecasts of real estate agents and other experts in the sector clearly point upwards. Even if prices will no longer rise as extremely as in previous years: in principle, the value will continue to increase due to rising demand. In addition, construction interest rates are at a fairly low level. So far, however, low interest rates have been able to compensate quite well for rising property prices. However, construction interest rates are unlikely to fall further in the coming months and years. This means that there are few signs of interest rates falling further, but rather of a slight increase or sideways trend in the course of the current year 2021. According to experts, interest rates will tend to stagnate in the long term. There are currently few signs of declines as in the past years. However, according to most industry experts, this will not result in a collapse of the market. Above all, they rely on the strict processes for granting loans by the banks. In the future, many buyers will only need equity capital for incidental acquisition costs, the rest can be financed. Due to a solid examination of the credit institutions, this will not change in the coming years. After all, banks calculate very precisely and conservatively.
Here’s what’s happening with current property prices in Germany
In the first quarter of 2021, real estate prices for residential properties are at 120.8 index points. In concrete terms, this means that construction prices have gained almost 21 percent over the past six years. The index value in the last quarter of 2020 was still 115.8 points for comparison. So we can see that the trend is still upwards. Is that too theoretical? Practically, the current index value on the property market means the following: If the buyer purchased a medium-sized house for 200,000 euros in 2015, building exactly the same property would cost 241,600 euros according to today’s index. And that is using exactly the same materials as in 2015.
These are the prices for real estate in Berlin in 2021
A region in high demand for living and housing continues to be Germany’s capital Berlin. In order to have a better view of prices, it is not worthwhile to refer to the index points, as these apply to the whole of Germany on average. A study by the consulting firm Knight Frank, for example, calculated the largest price increase worldwide for properties in Berlin in 2017. According to their data, prices rose by a full 20.5 per cent from the end of 2016 to the end of 2017 alone. This puts the increase within one year well ahead of popular cities such as Izmir in Turkey or Reykjavik in Iceland. If we look at a further period from 2014 to 2019, this results in an increase of 69 per cent for Berlin. Compared to the rest of Germany, however, Berlin is not even at the top of the list.
Is it worth buying a house in 2021?
Many interested people ask themselves whether buying a flat or house in the current year is worthwhile under the impressions of the pandemic. First of all, of course, this depends on the benefit of the property. Furthermore, it must be considered exactly in which regions renting is more favourable than buying. According to property consultants and numerous studies, it must be said that buying is more advantageous than renting in almost all regions of Germany – even in the large metropolises with exorbitantly high prices. However, one can arrive at a somewhat different assessment if one focuses on the financial burden. Repayment should not be left out of the equation, because this usually has to be made. This has the effect that in some places the financial burden of financing is much higher each month than in the case of rent. Especially in the metropolises and expensive holiday resorts, this is not much of a surprise. In considerably more than half of all cities or districts, however, it is still worthwhile to buy your own flat or house.
Trend for flats on the outskirts of towns and cities rising at the same time
Two contradictory trends are currently emerging on the property market. Due to the home office with fast internet, flats and houses in the city centre are becoming more and more popular. In addition, due to contact restrictions, many people want to live close to their acquaintances, as it is then quicker to visit them if they become unwell. On the other hand, many families realise that living spaces are too small and cramped when the whole family is permanently at home. Affordable flats and houses are more likely to be found on the outskirts of towns or in the countryside, which is why a trend is emerging here as well. In principle, therefore, buying a nice house can be sensible and advisable both for investment purposes and to move into yourself. The pandemic is not doing any significant damage at the moment and prices will probably rise more rapidly again after the pandemic than they are at the moment. When making a decision, it is important to take a close look at the location, the conditions and the terms and not to rush into a purchase.