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20082020

Real Estate Gaining in Popularity in Wake of Crisis

Real estate is considered a particularly safe type of investment. This is probably one of the main reasons why the experience of the corona virus crisis has made it even more popular among private investors than it was anyway. In a recent poll, YouGov asked about 2,000 people what they considered a sensible investment type – with real estate coming out on top, having been cited far more often than bullion, equities or savings accounts. The poll returns suggest that 56 percent of all Germans believe that real estate is a robust investment. Compared to a similar poll conducted in February, meaning before the corona virus crisis erupted in full force, real estate has therefore gained in popularity, because only 52 percent of the respondents named it as their first choice.1

At the same time, Germans are even more convinced of the safety of real estate than they used to be. In February, 45 percent of the respondents had shared the opinion that real estate is safe to invest in, whereas the latest poll returned an affirmative response from 49 percent. Other advantages of real estate that were identified included its crisis resilience (34 percent) and its suitability for asset building (30 percent).
 

Prices Kept on Rising even during the Depth of the Crisis

The popularity of real estate—and most notably of residential real estate—is mirrored by the latest price trend. Despite the coronavirus crisis, selling prices for condominiums and houses continued to go up right through the second quarter of this year. The F+B research institute determined that condominium price tags were 1.3 percent higher in Q2 than they had been during Q1. In fact, selling prices rose by 5.9 percent between April and June when compared to the prior-year quarter.2

Considering that the second quarter of this year marked the peak of the crisis, it is a remarkably positive development. This degree of value retention in times of crisis is therefore vindicating the wide-spread belief among Germans that real estate is a safe investment asset class.


Even Indirect Real Estate Investments are Popular

But now, as then, less than half of all German households own the homes they inhabit, and the German homeownership rate remains one of the lowest across Europe. Equity capital requirements represent the highest hurdle for many who would love to buy a home. In the mentioned YouGov poll, this was the obstacle most frequently cited, as 49 percent of the respondent named it as such. Far fewer—34 percent, to be exact—saw the repayment of the mortgage loan as a hurdle, which is a plausible poll finding given the historically low level of interest rates on mortgage loans.

Yet the way forward for those who are unable or unwilling to buy a residential property outright because of the capital requirements could be to opt for indirect real estate investments instead, e. g. by investing in the stock of real estate companies. According to the YouGov poll, indirect real estate investments are trusted nearly as much as actual real estate is, as 41 percent of the respondents consider them an attractive alternative.

1 www.haufe.de/immobilien/investment/immobilien-als-kapitalanlage_256_521838.html
2 www.spiegel.de/wirtschaft/service/immobilien-haeuserpreise-steigen-waehrend-corona-krise-stark-an-a-8d08f4dc-b9b9-4324-ba81-02c299a69d2b