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Industry Insiders Expect Demand for Real Estate to Remain Stable

A survey conducted among real estate industry insiders found that two out of three respondents believe that the fundamental demand in the largest German cities will maintain its level despite the coronavirus crisis The survey was commissioned by Dr. Lübke & Kelber, a company in business as property developer, estate agency, investment manager and asset manager.1

The defining trends on the real estate markets are intact, or so the survey findings suggest. Only one in five respondents assumed that the markets suffered “irreparable damage,” whereas 37 percent are convinced of a speedy recovery of prices and transaction volumes.

Much Brighter Climate in the Residential Sector

The verdicts for the residential real estate markets were particularly favourable. Two out of three survey respondents assume that the residential property segment will remain “on a stable growth trajectory.” This matches the outcome of the latest Real Estate Climate index released by Deutsche Hypo. Here, the sentiment in the Residential segment is better than in any other asset class.2

In May, the Residential Climate index gained 10.7 percent since April. This has brought the Residential index up to 105.6 points, well above the comprehensive index score (70.2 points). The only other segment that also brightened between April and May is logistics, whereas the other asset classes continued to deteriorate. Especially in the retail and hotel segments, the climate index registered heavy further losses. This includes the office segment, although the rate at which sentiment deteriorated here was much slower than it had been between March and April.

Condominium Prices Stable

The comprehensive index also dropped between April and May, yet unlike the office segment, the rate of decline was rather moderate compared to the nosedive seen between March and April. In any case, the current Real Estate Climate is still a far cry from its absolute trough of December 2008 (42.2 points) when the financial crisis was at its worst. For the purpose of the Real Estate Climate index of Deutsche Hypo, around 1,200 real estate experts are queried for their impressions each month.

The robust outlook of the residential real estate sector during the ongoing crisis is also reflected by the statistics of the real estate platform. These show that condominium prices in most of Germany’s major cities have either increased slightly or remained stable since year-end 2019.