No Slowing Down for Residential Investors in 2021
The coronavirus crisis had virtually no adverse consequences on Germany’s residential property market in 2020. Nor is 2021 likely to see any change in the status of real estate as a coveted commodity: According to a recent survey, the number of investors planning to buy real estate in 2021 has actually increased year on year.
In fact, 80 percent of the market players intend to enlarge their real estate holdings in 2021. A year ago, only 48 percent of the respondent to the same survey quoted such plans. This is the gist of a survey by Engel & Völkers Investment Consulting (EVIC) for which investors from the real estate industry were polled between October and December 2020.1
Demand Keenest for Residential Real Estate
Striking to note is that residential real estate is by far the most popular asset type among investors. Three out of four interviewed investors (75 percent) wish to buy residential properties in 2021, whereas office real estate is on the shopping list of only 41 percent. Logistics real estate is targeted by 33 percent of the investors. Demand for hotel and retail real estate (excepting food retailing) is clearly lower. Investors want to reduce their property holdings in either of these segments.2
The two sectors also experienced by far the heftiest rent reductions. At 57.5 percent, the most drastic rent cuts were reported from the hospitality segment, followed by the retail segment (not including groceries) with 22-percent cuts. These compare to reductions of 10 percent in the office segment and 3 percent in the residential segment.
Investors Anticipate Price Hikes
Another outcome of the survey is that the metro regions will keep gaining in appeal. One third of the respondents (34 percent) intend to step up their investments in the Big 7 cities, whereas just 14 percent plan to roll back their investments there. More popular yet are the areas surrounding the metropolises. Here, half of all respondents (51 percent) plan to invest more than they used to. That being said, other major cities also remain very attractive, as 48 percent of the investors plan to expand their investments in cities of more than 100,000 residents.
The overwhelming majority of the respondent investors also expects further price growth in the real estate sector. Especially in the conurbations, almost 80 percent of the investors believe that prices will keep climbing. Around 57 percent of the investors predict price hikes in the wider regions.