Fastest Price Growth for Residential Real Estate in Four Years
During the third quarter of 2020, prices for residential real estate went up at a rate of 7.8 percent over prior-year period. It is the fastest price growth since the end of 2016, when prices rose by 8.4 percent year on year, according to the latest data released by the Federal Statistical Office (Destatis). Between the second and third quarter of 2020 alone, residential real estate became 2.6 percent more expensive in Germany, or so the data show.1
The brisk price hike illustrates how the experience of the COVID-19 crisis has evidently pushed demand for residential real estate up even further. The latest Investment Market Report by Savills, one of the major real estate service providers, confirms the impression.
Demand Expected to Increase even Further in the Years to Come
According to the report, the second-highest sales volume since 2015 was registered on the market for larger residential real estate transactions (50 residential units or more). During the first eleven months of 2020 alone, residential property sales (17.9 billion euros) already exceeded the year-end total of 2019.2
But the experts of Savills do not consider 2020 a fluke year, quite on the contrary. According to its Investment Market Report, Savills actually anticipates yet higher demand in the years ahead. This is explained, on the one hand, by the fact that central banks will have to maintain their low-interest policy for an extended period of time yet, and that this makes residential real estate a highly significant investment option. On the other hand, the coronavirus crisis has intensified the degree of uncertainty for office and retail real estate commitments, prompting investors to shift their focus even further toward residential real estate.
COVID-19 has Elevated the Status of the Private Home
According to Savills, the coronavirus pandemic may have reinforced the status of the private home. “The lockdown experience could enhance the appreciation of the own home as centre of people’s lives, and combine with other effects, such as the growing acceptance of the home office, to prompt a demand for larger homes.
The latest “European Residential Market Map” compiled by Catella suggests that housing markets everywhere in Europe have well positioned themselves in the wake of the crisis. In 61 of the analysed cities across 19 different countries, condominium prices rose by an average of 3.6 percent between the first and the third quarter of 2020 – meaning over a period of just six months.3