The city of Munch, Germany, is one of the country’s industrial and technological centers, attracting residents from all over the world thanks to the constant demand for qualified jobs.
Home purchase prices show growth that many describe as a real estate bubble, with an average of 5000 EUR/m2 in 2016 to 7500 EUR/m2 in 2020, which leads to a growth of 50%. Prices not only grow due to the economic boom and strategic situation of the city, the financing facilities are excellent, the financial institutions provide loans with interests close to 0%.
The constituents of the market are the classic buyer / investor, real estate developer, construction and financial entities. The real estate market is heavily regulated, the laws strongly protect the owners and tenants, the real estate agents have by law a percentage of 4% on the purchase and sale operation. A large part of the apartments are intended for investors with the intention of providing rental housing.
The Financial Times in its article “The decade of real estate” of June 4, 2020 outlines the situation of the real estate industry in Germany, with special attention to commercial properties.
The city of Frankfurt had a boom in the financial center from 33 EUR/m2 in 2010 to 41 EUR m2 in 2020, however, prices have fallen 6.5% since the COVID-19 crisis
The 7 big cities in Germany have enjoyed an increase in the last decade. JLL argues that investors rate commercial real estate as expensive, a sign that the price spike has been reached.
The parallelism of the COVID-19 crisis with the global financial crisis of 2008 are common, and the Financial Times is no less. Europe experienced a large increase in available retail space and lower rental prices during the financial crisis, but in this new crisis Sonja Förster of DBRS Morningstar argues that Germany is better prepared thanks to long-term leasing contracts. The newspaper also argues that national and private banks do not present great risk thanks to low delinquency rates, loans with coverage, generous aid to part-time workers and healthy debt ratios.
The Financial Times forecast is consistent with the interim statement of accounts of Consus Real Estate AG on July 29, 2020. The impact of the COVID-19 crisis has not affected this large German real estate company with a presence in the 7 big cities. The company has met expectations for growth and debt reduction. Additionally, it maintains its forecast for the rest of the year, arguing that the impact of the crisis will be very limited for them.