Berlin real estate is extremely crisis-proof
Even though there is a great feeling of uncertainty in view of the Sars-CoV-2 virus, it is already clear that owners of residential properties in Berlin will not be among the victims of the pandemic. Nevertheless, the crisis will not remain without effects on the Berlin real estate market. It is to be expected that the markets for commercial and residential real estate will react differently. Also, the effects will occur indirectly and with a time lag. In principle, residential properties are much more resistant to crises than commercial properties because they are not, or only much less, dependent on macroeconomic uncertainties. As of March 2020, a sideways movement in prices for residential real estate can be observed throughout Berlin. It is not yet possible to say whether this is actually related to the Sars-CoV-2, an effect of the latest regulatory measures, or whether it points to a consolidation in the Berlin real estate market.
A general sideways movement can be observed. Single and two-family houses, terraced houses and semi-detached houses will not be able to maintain the price increases from 2018 to 2019 in the current year. In the upper price segment, however, villas are gaining strongly. As a result of the ongoing market regulation, in particular milieu protection and rent capping, apartment buildings (multi-family houses) will not be able to maintain the previous year's level.
With regard to apartments in Berlin, a distinction must be made between rented and non-occupied properties in Berlin. With the exception of attics, all types of apartments show a levelling off of the increase curve, but at a very high level. Rented apartments are currently under stronger pressure due to the rent cap. Sellers and buyers are behaving wait-and-see.
What can owners do?
Everyone must be prepared for the virus. This is not primarily about real estate values, but about the health of all persons who have to do with the "entity" real estate. Owners, tenants, administrators and facility managers must all act in concert and pay even more attention than usual to hygienic conditions. The virus shows where countermeasures can and must be taken. Digitalization is an important ally.
Tenants should be informed, e.g. about changed cleaning times, public quarantine measures and emergency numbers. Owners do not have to physically meet for meetings, with the high risk of infection. Meetings can be organised e.g. by video conferencing. Documents do not have to be printed on paper and change from hand to hand. Digitalisation helps to prevent and interrupt chains of infection. Despite the necessary social distance, day-to-day business can be continued with the help of digitalisation.
How does the virus affect the different segments?
In the case of residential properties, the effects are mainly in the operational sphere. The larger housing companies are primarily concerned with the protection of their employees and their tenants, who are in constant physical contact with each other. Hygiene measures in the buildings are increased, direct contact between tenants and employees is limited to the most necessary.
Retail spaces react very differently. There are winners and losers. The latter include small businesses. Even minor fluctuations in turnover can cause difficulties here. Massive and long-term slumps in turnover lead to a wave of insolvencies.
The operators of hotel properties are under massive pressure and are existentially affected by the effects of the pandemic at all levels. Major events such as trade fairs are cancelled and large contingents of bookings are no longer possible.
Start-ups have founded the trend of co-working space and are now the reverse driver. Co-working spaces are underbooked because many companies with a high degree of digitalization are letting their employees work from home offices.
Property management companies are facing major challenges. Those who have overslept digitization are now coming under pressure.
To evaluate a sale, owners should contact us for a property valuation. The market situation is still good despite milieu protection, rent caps and coronavirus and property prices are at an all-time high. However, rented apartments are already falling in price due to capped or declining rental income. There are two scenarios where it is worth considering a sale: when a flat becomes vacant and when the speculation period of 10 years is over, even if the flat is rented. It is completely unclear whether the lawsuits brought by the CDU and FDP before the Federal Constitutional Court will be successful and the rent cap will be tilted, as well as whether the rent difference retained by the tenant will then have to be paid back. Find out more on our market reports or arrange a free consultation with us. We are at your service.