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The crisis in the crown cannot stop the real estate boom. In the third quarter, home and apartment prices rose more than they have for nearly four years. Rents went up a little more slowly.
Despite the pandemic, many people in Germany want to buy apartments and houses. In light of persistently high demand, residential properties cost an average 7.8 percent more between July and September than the previous year. This is clear from the figures from the Federal Statistical Office.
The price increase is the strongest since the fourth quarter of 2016. At that time, the price of residential properties increased by 8.4 percent.
Double-digit price increase in medium-sized cities
The largest increases occurred in medium-sized cities. House prices there rose 10.2 percent. In major German metropolises (Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, and Düsseldorf), condos were 7.3 percent more expensive. Single-family and two-family homes cost 8.9 percent more.
Residential buildings were also in demand in rural areas. House prices in the most densely populated rural districts rose 9.7 percent and apartment prices rose 7.1 percent.
Rents aren’t increasing that much
However, rents did not evolve at the same rate as property prices. As the Gewos Institute for Urban, Regional and Housing Research in Hamburg found, rents increased in the third quarter by an average of 3.4 percent. In the seven largest German cities, the increase was 4.5 percent. “However, the rent increases are slowly stabilizing in the long term,” said Gewos CEO Carolin Wandzik. The increase in rents in the summer of 2019 was even higher than in 2018.
Rents are likely to continue to rise in 2021, most likely in the bacon belts of metropolitan areas. Wandzik believes that next year rents in the surrounding areas will increase faster than in the big cities.
Tendency to live in the surroundings
“The crown crisis intensifies the trend towards migration to the surrounding areas of large cities,” says Michael Voigtländer, a real estate expert at the Institute for German Economics (IW). “The surrounding area is attracting more families who need space, and smaller households, singles and young people dominate the cities.”
For years, under pressure from high rents and apartment prices, families have left the cities, where real estate is significantly cheaper and there are more houses in the country. The metropolises grew mainly with the influx of foreign skilled workers. That should change now with the crisis of the crown.
According to IW expert Voigtländer, the German economy could attract fewer skilled workers after the pandemic than before. “There is a demand for smaller cities with a good variety of kindergartens, schools and stores, as well as good transport links to metropolises. The trend towards home offices is strengthening the trend even so, because people could take longer in working.
