After corona: The German housing market is bouncing back

After a break of several weeks, the demand for real estate in Germany is back again. The number of prospective buyers tripled between April and May 2020. Peter Kleinwächter from Your German Mortgage explains why the much-anticipated fall in real estate prices might never happen.

Demand has returned to the real estate market. This was confirmed by a study conducted by the market research institute YouGov on behalf of the nationwide real estate agent Homeday.

Demand on the German property market rising again

In May, 20 percent of more than 3.500 respondents stated that they would consider buying a property in the near future. In April this figure was only six percent. This means that interest has more than tripled in just a few weeks.

“The results of the study are in line with our internal data and experience,” says Fabian Sautter, manager of the international boutique property agency Berlinmaegleren. “Since the beginning of May, for example, we have seen a rapid return in demand; in the meantime, we have already risen well above pre-corona levels in the number of viewing requests, incoming purchase offers and completed transactions.”

Bargain hunters have arrived

This is definitely a sign that things are returning to “business as usual” on the property market. However, it also seems likely that this upswing in demand is at least partially driven by the growing perception that the coronavirus crisis is putting pressure on property market prices.

In the first YouGov survey in April, 39 percent of prospective buyers were convinced that property prices would fall. This figure has risen even further in the meantime: in May, just fewer than one in two prospective buyers believed that prices would come under pressure due to the pandemic. After years of rapidly rising prices, many are now understandably hoping for a bargain on the property market.

No sign of slow-down on German real estate market

However, according to Sautter, there are no real signs of this hope materialising, based on the current development of real prices. For approximately four weeks after the outbreak of the coronavirus pandemic, there was a sideways movement in the value of existing properties ready for occupancy. This means that prices did not rise, but they also did not fall. And, now, demand is picking up again, which can only mean one thing.

“We currently have the same number of enquiries as before corona,” says Sautter. “But we can see that the seriousness and creditworthiness of customers have improved. More people are now really looking for a property as a safe asset. This could be an outcome of corona: People have an increased need for investment and, from experience, stones and mortar is a good option for this.”

Supply declining and prices increasing

These conclusions are backed up by Your German Mortgage’s own data research across all major German property platforms. It seems that the supply is declining, prices are increasing, and properties are selling much more quickly than in pre-corona times.

For example, the graph below shows the average number of properties on sale between October 2018 and April 2020 in the Escherheim district of Frankfurt.

Source: Your German Mortgage. (Market analyses also available for Berlin, Cologne, Dusseldorf, Hamburg, Munich, Stuttgart and Leipzig.)

Every third prospective buyer has changed their search criteria

That’s not where the changes reaped by the coronavirus pandemic end: 34 percent of respondents to the YouGov survey who are planning to buy a property stated that they have adjusted their search criteria due to the pandemic.

The most common adjustment being made is: the price. Four out of 10 prospective buyers must or want to tighten their belts and are now looking for a property with a smaller budget in mind.

In addition, one in three would now prefer to live at a greater distance from their neighbours and are now looking for a rural property (31 percent). However, 28 percent have had the opposite reaction to the crisis, and would now prefer to move to an urban environment to benefit from better infrastructure and supply.

Either way, it is clear that certain types of property (for instance, those with a garden) will now be in greater demand than ever before. With income tight for many, competition for affordable homes is likely to increase.

Are you re-evaluating your real estate options in light of the coronavirus pandemic? Your German Mortgage’s calculator gives you an idea of what you could afford in Germany, using up-to-date market interest rates for your specific situation.