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09 04 2020

Experts: Residential Remains Attractive Asset Class

For weeks now, the coronavirus pandemic has been the number one topic not just around kitchen tables, in the media and in politics, but also in the real estate industry, of course. Subject to particularly intense debate are the potential ramifications of the pandemic for the real estate market. While these are still hard to gauge at this time, the asset class of residential real estate is credited by many with a high degree of stability in times of crisis.

Felix von Saucken, Head of Residential at Colliers, called residential property a robust asset class and a safe haven that many investors are likely to favour in face of the stock market upheavals and the lower interest rate levels. “The greater the unease in the population, the stronger the demand is going to become as a result,” the Colliers expert believes. He added that, while there could by all means be vacancies, he was unaware of any price fluctuations or fire sales so far.1
 

Winner of the Crisis

RICS Deutschland is also of the opinion that the asset class of residential property has little to fear compared to other real estate sub-markets. Especially for institutional investors, residential properties were said to be particularly interesting during times of crisis because of their comparatively secure rental income. Neither widespread collection losses from residential tenants nor an increase in vacancies are to be expected in Germany, according to the RICS experts.2

Nico Rottke, a former professor at the European Business School (EBS) told the Immobilien Zeitung real estate trade paper that residential real estate is one of the “winners of the crisis in uncertain times” and that there is no risk the crisis could spill over into the residential asset class. Claus Michelsen of the DIW German Institute for Economic Research is convinced that residential real estate will continue to be seen as a safe investment, even if people are indulging in “price fantasies” at the moment.3


Market Players Still Trying to Get their Bearings

However, some voices have struck a more sceptical note. Michael Voigtländer of the IW German Economic Institute in Cologne emphasised that the real estate market is shock-frozen, and that market players are trying to get their bearings. He added that the number of transactions and removals has noticeably declined. According to Voigtländer, the slowdown in incoming migration to the cities as well as the stagnation or possibly even decline in household incomes could cause rents to grow at a much slower pace.

Günter Vornholz of the EBZ Business School told the Handelsblatt business daily that the looming recession could also be felt on the residential property market because it would reduce the financial latitude among buyers and tenants. Karsten Jungk of Wüest Partner Deutschland expects the demand among buyers to decline this year – while seeing no sign that massive price drops are looming.4
 

1 www.colliers.de/presse/wohnen-eine-der-krisensichersten-assetklassen/
2 www.immobilienmanager.de/rics-auswirkungen-der-corona-krise-auf-assetklasse-wohnen-im-vergleich-gering/150/75406/
3 www.immobilien-zeitung.de/155597/wohnungswerte-wackeln
4 www.handelsblatt.com/finanzen/immobilien/immobilienbranche-coronakrise-veraendert-die-lage-auf-dem-wohnungsmarkt-dramatisch/25680948.html